June 10, 1998
Accordingly, it is exempt from the
BIR RULING [DA-231-98]
Sisters of the Order of the Company of Mary Our Lady
Corner 15th-9th St. Nazareth
9000 Cagayan de Oro City
Attention: Sr. Luz Eugenia Vallejo, O.D.N .
Superior
Gentlemen :
This refers to your letter dated August 12, 1997 in relation to your
application for registration as a Donee Institution under B.P. Blg. 45,
as implemented by BIR-NEDA Regulations No. 1-81, as amended.
cdta
Documents submitted to this Office disclosed that the Sisters of the
Order of the Company of Mary Our Lady (O.D.N.) is an international
religious congregation present only in Cagayan de Oro City; that it is a
non-stock, non-profit institution registered with the Securities and
Exchange Commission under SEC Reg. No. 129015 dated October 4,
1985; that one of its objectives is to acquire, hold and dispose of such
personal and real properties as may be conveyed to or acquired by the
said corporation sole and to have the power to donate, grant, convey,
cede, lease, mortgage or exchange or otherwise dispose of any or all of
such properties subject to the provisions of existing laws of the
Republic of the Philippines and the Order of the Company of Mary
Our Lady; that its source of income are donations from the
congregation's Provincial Level/Government and co-sisters based in
Japan and from the honoraria of its sisters working in different
institutions; that its activities include pastoral activities especially for
the young people such as catechesis, retreats and recollections; and
that it has never entered into any employee-employer relationship and
has therefore never withheld any tax from any individual or group of
persons.
In reply, please be informed that this Office is of the opinion that the
Sisters of the Order of the Company of Mary Our Lady (O.D.N.) falls
within the purview of a corporation organized for religious, charitable,
cultural and social welfare purposes as contemplated under Section
30(E) and (G) of the Tax Code of 1997 [then Section 26(e) and (g) of
the Tax Code, as amended].
payment of income tax on income received by it as such
organization, and therefore, need not file an income tax return
concerning such income. However, it is subject to the corresponding
internal revenue taxes imposed under the Tax Code of 1997 on its
income derived from any of its properties, real or personal, or any
activity conducted for profit regardless of the disposition thereof,
which income should be returned for taxation. Accordingly, interest
income from currency bank deposits and yield or any other monetary
benefits from deposit substitute and from trust funds and similar
arrangements are subject to the 20% final withholding tax pursuant
to Section 27(D)(1) in relation to Section 57(A), both of the Tax
Code of 1997. (BIR Ruling No. 4-90 dated January 12, 1990) cdtai
Section 101(A)(3) of the Tax Code of 1997 provides that donations
in favor of an educational and/or charitable, religious, cultural or
social welfare corporation, institution, accredited non-government
organization, trust or philanthropic organization or research
institution are exempt from the payment of donor's tax subject to the
condition that not more than 30% of the said gifts shall be used by it
for administration purposes.
Furthermore, Section 34(H)(2)(c) of the Tax Code of 1997 [then Sec.
29(h)(2)(C) of the Tax Code, as amended and as implemented by
BIR-NEDA Regulations No. 1-81, as amended by Revenue
Regulations Nos. 1-82 and 10-82], provides that donations to a non-
government organization which means a non-profit domestic
corporation or association organized and operated exclusively for
scientific, research, educational, character building and youth and
sports development, health, social welfare, cultural or charitable
purposes or a combination thereof, no part of the net income of
which inures to the benefit of any private individual shall be
deductible in full from the taxable business income of the donor,
provided however, that the accredited NGO has complied with the
level of administration expenses and utilization requirements as
provided for under the said Section.
It should be understood that the organization shall be constituted as
withholding agent for the government if it acts as an employer and
its employees receive compensation income subject to the withholding
tax under Section 79(A) of the Tax Code of 1997, [then Sec. 72(a) of
the Tax Code, as amended and as implemented) by Revenue
Regulations No. 6-82, as amended], or if it makes income payments to
individuals or corporations subject to the expanded withholding tax
pursuant to Section 57(B) of the Tax Code of 1997 [then Sec. 50(b) of
the Tax Code, as amended and as implemented by Revenue
Regulations No. 6-85, as amended].
Moreover, it is required to file on or before April 15 of each year a
profit and loss statement and balance sheet with the annual information
return under oath, stating its gross income and expenses incurred
during the year and a certificate showing that there has not been any
change in its By-laws, Articles of Incorporation, manner of operation
and activities as well as sources and disposition of income.
It is requested that a copy of this letter of exemption should be
attached to the annual information return which you will file on or
before April 15. Under Section 235 of the Tax Code of 1997, any
provision of existing general and special law to the contrary
notwithstanding, the books of accounts, and other pertinent records of
tax-exempt organizations or grantees of tax incentives shall be subject
to examination by the BIR for purposes of ascertaining compliance
with the conditions under which they have been granted tax
exemptions or tax incentives, and their tax liabilities, if any.
This ruling is being issued on the basis of the foregoing facts as
represented. However, if upon investigation, it will be disclosed that
the facts are different, then this ruling shall be considered null and
void. (BIR Ruling No. 114-96 dated October 22, 1996 BIR Ruling No.
517-A-93 dated December 12, 1993) cdti

Very truly yours,

(SGD.) SIXTO S. ESQUIVIAS IV
Deputy Commissioner
(Legal and Enforcement Group)