RMC No. 51-2014 — Clarifies the inurement prohibition under Section 30 of the National Internal Revenue Code of 1997

BURRAU OT INTORNAL REVENUE RECORDS MGT DIVSION JUN 1 1 2014 4:310M

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REPUBLIC OF THE PHILIPPINES RECEIVED

DEPARTMENT OF FINANCE BUREAU OFINTERNAL REVENUE

Quezon City

June 06, 2014

REVENUE MEMORANDUM CIRCULAR NO. 51- 30/4

SUBJECT Internal Revenue Code of 1997 Clarifying the Inurement Prohibition under Section 30 of the National

TO All Internal Revenue Officers and Others Concerned

amended, enumerates the non-stock and/or non-profit corporations/ associations/ Section 30 of the National Internal Revenue Code (NIRC) of 1997, as

organizations that are exempt from income tax in respect to income received by them as such. "Non-stock" means "no part of its income is distributable as dividends to its members, trustees, or officers" and that any profit "obtain[ed] as an incident to its operations shall, whenever necessary v or proper, be used for the furtherance of

2012) the institution's purposes and. all its activities conducted not for profit' (CiR vs. St Luke's Medical Center, Inc.; G.R. Nos. 195909 and 195960 dated 26 September the purpose or purposes for which the corporation was organized" (Section 87 Corporation Code). "Non-profit" means that "no net income or asset accrues to or benefits any member or specific person, with all the net income or asset devoted to

Therefore, in order for an entity to qualify as a non-stock and/or non-profit corporation/association/organization exempt from income tax under Section 30 of the NIRC, as amended, its earnings or assets shall not inure to the benefit of any of its trustees, organizers, officers, members or any /specific person. The following are considered "inurements" of such nature:

1. The payment of compensation, salaries, or honorarium to its trustees or /organizers:

2. The payment of %exorbitant or unreasonable compensation to its employees;

3. The provision of welfare aid and financial assistance to its members. An

organization is not exempt from income tax if its principal activity is to receive and manage funds associated with savings or investment programs, including pension or retirement programs. This does not cover a society, order, association, or non-stock corporation under Section 3o(C)

of the NIRC providing for the payment of life, sickness, accident and other benefits exclusively to its members or their dependents;

4. Donation to any person or entity (except donations made to other entities formed for the purpose/purposes similar to its own):

5. The purchase of goods or services for amounts in excess of the fair

and which one or more of its trustees, officers or fiduciaries has an interest; market value of such goods or value of such services from an entity in

6. When upon dissolution and satisfaction of all liabilities, its remaining assets must be dedicated to its exempt purpose. Accordingly, its assets are distributed to its trustees, organizers, officers or members. Its

constitutive documents must expressly provide that in the event oi

government for public purpose. for the purpose/purposes similar to its own, or to the Philippine dissolution, its assets shall be distributed to one or more entities formed

accordingly: All other issuances inconsistent herewith are hereby repealed or modified

Circular as wide a publicity as possible All concerned are hereby enjoined to be guided accordingly and give this

This Circular shall take effect immediately

KIM S.JACNTO-HENARES Commissioner of Internal Revenue

024729

BUREAU OF INTERNAL REVENUE RECORDS MGT DIVISION 431P.M

RECEIVED jtJW 31 2014 1- MMa