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TAX EXEMPT CORPORATION UNDER THE NIRC

The following organization shall not be taxed(sec. 30 NIRC):


1. Labor, agriculture or horticulture organization not organized principally for
profit.
2. Mutual savings bank and cooperative bank
3. Fraternal beneficiary society, order or association
4. Cemetery company
5. Religious, Charitable, Scientific, Athletic or Cultural corporation
6. Business league chamber of commerce, or board of trade
7. Civic league
8. A non-stock and non-profit educational institution
9. Government educational institution
10. Farmers' or other mutual typhoon or fire insurance company and like
organization
11. Farmers', fruit growers', or like association

Common limitation: The income of whatever kind and character of the foregoing organizations
from any of their properties, real or personal, or from any of their activities conducted for
profit regardless of the disposition made of such income, shall be subject to tax imposed
under this Code.( last par, sec. 30 NIRC)


1. Labor, agricultural or horticultural organization not organized principally for
profit(sec.30 par. a of NIRC)
It must not organized principally for PROFIT. Corporation engaged in
growing agriculture or horticultural products or raising livestock or
similar products for profit are subject to TAX.(section 25, Rev. Reg. No.
2)
Provincial fairs and like association of quasi-public in character if
designed to encourage development of better agricultural and
horticultural products through a system of awards, prizes or premiums
and whose income is derived from gate receipt, entry fee, donations,
etc is used exclusively to meet necessary expenses.

Profit from which inure to the benefit of their stockholder are not tax-
exempt.
2. Mutual savings bank not having a capital stock represented by shares, and
cooperative bank without capital stock organized and operated for mutual
purposes and without profit(sec. 30 par. b of NIRC)

Requisite for exemption:
a. No Capital stock represented by shares
b. Earnings, less only the expenses of operating are distributable wholly among
the depositors
c. Operated for mutual purposes and without profit. (not qualified as mutual
saving bank if the deposit are made compulsory under contract and is
operated for speculation rather than for saving.

Exemption applies to foreign as well as domestic bank.



3. A beneficiary society, order or association, operating for the exclusive benefit
of the members such as a fraternal organization operating under the lodge
system, or mutual aid association or a non-stock corporation organized by
employees providing for the payment of life, sickness, accident, or other
benefits exclusively to the members of such society, order, or association, or
nonstock corporation or their dependents. (sec.30 par. c of NIRC)
Lodge System a society shall be deemed to be operating on the lodge system if it has
supreme governing body and subordinate lodges into which members are elected,
initiated or admitted in accordance with its law, rules and ritual.

Requisite for exemption;
a. Operated under lodge system or for the exclusive benefit of the member of a society.
b. Established system of payment to its member or their dependents of life, sick , accident
, or other benefits.
c. No part of the net income inures to the common benefit of the stockholder or members.
4.Cemetery company owned and operated exclusively for the benefit of its
members. (sec. 30, par. d of NIRC)
(1987 Constitution: Article VI, sec. 28, par. 3) Non-profit cemetery shall
be exempt for taxation.
Requisites for exemption:
a. Owned and operated exclusively for the benefit of its owners.
b. Not operated for profit.

Any cemetery corporation chartered solely for burial purposes and
not permitted by its charter to engage in any business not necessarily
incident to that purpose is exempt income tax.
-Provided: that no part of its net earnings inures to the benefit of any
private shareholders or individual.



5.Non-stock corporation or association organized and operated exclusively for
religious, charitable, scientific, athletic, or cultural purposes, or for the
rehabilitation of veterans, no part of its net income or asset shall belong to or
inures to the benefit of any member, organizer, officer or any specific person.
Requisites for exemption:
a. Organized and operated for one or more of the speified purposes. (exclusively
for religious, charitable, scientific, athlethic, or cultural purposes or
rehabilitation of veterans)
b. No part of its net income must inure to the benefit of private stockholder or
individuals.
With respect to its non-paying patients, St. Lukes is exempted from income tax for being
a non-stock corporation or organization operated exclusively for charitable or social
welfare purposes. Accepting paying patients does not destroy the exemption of St. Lukes
under section 30 of NIRC. Instead last par. of sec. 30 of NIRC provides that St. Lukess
activities conducted for profit, regardless of its disposition of such income, shall be
subject to tax.(CIR vs St. Lukes Medical Center, Inc. Sept. 26 2012)
Conduct strictly religious activities: fees recieved in baptismal, solemnizing
marriages, attending burials, holding masses, and other like income are
EXEMPT.
6.Business league chamber of commerce, or board of trade, not organized for
profit and no part of the net income of which inures to the benefit of any
private stock-holder, or individual
Requisite for exemption:
a. Association of persons having some common business interest
b. Limited its activities to work for such common interest
c. Not engaged in a regular business for profit
d. No part of the net income inures to the benefit of any private
stockholder or individual.

An association of person who are engaged in the transportation
business whether by land or water, which is designated to promote
the legitimate object of such business, and all of the income of which
is derived from membership fees dues and expended for office
expenses is exempt(sec. 31, Rev. Reg. No. 2)
7.Civic league or organization not organized for profit but operated exclusively
for the promotion of social welfare
Requisite for exemption:
a. Not organized for profit but operated exclusively for beneficial to the community as a
whole. In general, organization engaged in promoting the welfare of mankind. (section
32, Rev. Reg. No. 2)
b. Sworn affidavit with the BIR showing the following:
-Character of the league or oraganization;
-Purpose for which it was organized;
-actual activities
-Source of income and disposition
-All facts relating to the operation of the organization which affects its right of exemption
c. The copy of article of incorporation, by-laws and financial statements should be
attached in the sworn affidavit. (BIR rulling no. 21, Jan. 23 1961)

Example: organized for maintenance of sanitation, afford community police
protection, fire prevention.
8. A nonstock and nonprofit educational institution
All revenue and assets of non-stock, non profit educational institution used
actually, directly , and exclusively for educational purposes shall be exempt
from tax and duties. (par. 3,sec. 4, article XIV of 1987 Constitution)
-refers to internal revenue taxes imposed by National Government
-all revenue and assets used actually, directly and exclusively for educational purposes.
Revenue derived from the assets used in operation of canteen and bookstore are exempt
provided they are: owned and operated by the school as an ancillary activities, and same
are located within the school premise.
Rental payment from their building/premises: -subject to internal revenue tax.
reason: not related to exercise or performance of their educational purpose.
Unlike non-profit and non-stock corporation. Their interest income from currency bank
deposit used actually, directly and exclusively in pursuance of their purposes are exempt
under expanded foreign currency deposit system. (exempt from 20% final tax and 7 %
tax on interest income)
Exemption does not cover with holding taxes:
Reason: they are constituted as withholding agent for the government required to
withhold tax on compensation income from their employees.

9.Government educational institution
University of Philippines(UP) is subject to 20% final tax. Other government
educational institution are likewise subject thereto. (Act no. 1870, as
amended)
Reason: income from properties, real or personal or from any of their activities
conducted for profit, regardless of its disposition made of such income shall
be subject to tax. (BIR ruling 21-90, 28 February 1990)
10. Farmers' or other mutual typhoon or fire insurance company, mutual ditch or
irrigation company, mutual or cooperative telephone company, or like organization of a
purely local character, the income of which consists solely of assessments, dues, and
fees collected from members for the sole purpose of meeting its expenses
Requisite for exemption:
a. Income derived solely from assessment, dues and fees collected from members
b. Fees collected from members are for the sole purpose of meeting its expenses

11. Farmers', fruit growers', or like association organized and operated as a
sales agent for the purpose of marketing the products of its members and
turning back to them the proceeds of sales, less the necessary selling expenses
on the basis of the quantity of produce finished by them.
Requisite for exemption:
a. Formed and organized as sale agent for the purpose of marketing the product
of its member.
b. No net income to the members
c. Proceeds of the sale shall be turned over to them less the expenses on the
basis of the quantity of the product finished by them.



COMMON REQUISITES:
a. Not organized and operated principally for profit
b. No part of net income inures to the benefit of any member or individual
c. No capital represented by shares of stock
d. Educational or instructive in Character.

Tax Exempt GOCC (sec. 27(c) as amended by RA 9337)

GSIS
SSS
Philippine Health Insurance Corporation
PCSO