Requirements for BIR Tax Exemption of Non-stock, Non-profit in Philippines

By: Tax and Accounting Center Philippines

Under Revenue Memorandum Order No. 20-2013 (RMO 20-2013) dated July 22, 2013 entitled “Prescribing the Policies and Guidelines in the Issuance of Tax Exemption Rulings to Qualified Non-Stock, Non-profit Corporations and Associations under Section 30 of the National Internal Revenue Code of 1997, as amended”, non-stock, non-profit corporations are required to secure BIR Tax Exemption Ruling.

Hereunder are the general requirements for the application for BIR Tax Exemption Ruling:

• Application Letter for Tax Exemption citing the particular paragraph under Section 30 of the National Internal Revenue Code, as amended (NIRC) as basis for the tax exemption;
• Certified True Copy of the latest Articles of Incorporation and By-Laws issued by the Securities and Exchange Commission (SEC);
• Certification under oath by an Executive Officer of the Company as to: (i) all previous amendments/changes in the Articles of Incorporation and by-laws, (ii) Manner of activities, and (iii) the sources and disposition of income, if any.
• Certificate from the SEC on the amendment of Articles of Incorporation and By-laws;
• Certified true Copy of the Certificate of Registration with the BIR;
• Certification under Oath by the Treasurer of the Company as to the amount of income, compensation, salaries or any emoluments paid by the corporation to its officers, and other executive officers.
• Certification  issued by the RDO that the Company is not subject of any pending investigation, on-going audit, pending tax assessment, administrative protest, claim for refund or issuance of tax credit certificate, collection proceedings, or judicial appeal, or, if there is any, Original Copy of the Certification issued by the RDO on the status thereof;
• Certified true copies of the Income Tax Returns or Annual Information Returns and Financial Statements of the corporation or association for the last three (3) years;
• Statement under oath by the executive officer of the Company as to its Modus Operandi which shall include the following:

1. A full description of the past, present, and proposed activities of the Company;
2. Narrative description of anticipated receipts and contemplated expenditures; and,
3. Description of all revenues which it seeks to be exempted from income tax

• Any such other documents BIR may require as the circumstances warrant.

Notably, the above list is not all inclusive and BIR may required additional documentary requirements for BIR Tax Exemption. For non-stock, non-profit schools and other educational institutions, the following are the additional documentary requirements:

• Certified true copy of DepEd, CHED, or TESDA recognition /permit/accreditation to operate;
• If certification in (a) above is issued more than five (5) years, original copy of the Certificate of Operation/Good Standing from DepEd, CHED, TESDA;
• Certificate of Utilization of annual revenues and assets by the treasurer or his equivalent with breakdown of the following under Department of Finance Order (DOF) No. 137-87:

1.  Any amount in cash or in kind (including administrative expenses) paid or utilized to accomplish one or more purposes for which the Company was created or organized, including grant of scholarship to deserving students and professional chairs for the enhancement of professional course;
2. Any amount paid to acquire an asset used (or held for use) directly in carrying out one or more purposes for which it was created or organized, including the upgrading of existing facilities to support the conduct of the above activities;
3. Any amount in cash or in kind invested in an activity related to the educational purposes for which it was created or organized; and,
4. Any amount set aside for a specific project, which must be supported by a Board Resolution to be funded out of the money deposited in banks or placed in money markets, on or before the 15^th day of the fourth month following the end of its taxable year.

While RMO 20-2013 is under litigation on questions of validity, non-stock, non-profit corporations and associations are encouraged to apply for BIR Tax Exemption ruling in order to continue enjoying their income tax exemptions. Preparing some of the above requirements are quite technical so we suggest that you secure the services of a knowledgeable professional to ensure that the requirements are prepared taking into account the technical requirements of the BIR and related rules.

Disclaimer: This article is for general conceptual guidance only and is not a substitute for an expert opinion. Please consult your preferred tax and/or legal consultant for the specific details applicable to your circumstances. For comments, you may also please send mail at info(@)taxacctgcenter.org, or you may post a question at Tax and Accounting Center Forum and participate therein.