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BIR clears tax treatment on non-profit firms



By Prinz Magtulis (The Philippine Star) | Updated June 28, 2016 - 12:00am



Outgoing Internal Revenue commissioner Kim Henares has been hit for her slew of regulations issued weeks before she steps down by June 30. AP/Bullit Marquez, File

MANILA, Philippines - There’s no stopping outgoing Internal Revenue commissioner Kim Henares.

More than a week before she steps down, Henares has institutionalized regulations on tax exemptions for non-stock and non-profit corporations.

Issued June 20, Revenue Memorandum Circular 64-2016 clarified that being registered as a non-profit organization with the Securities and Exchange Commission (SEC) does not guarantee an automatic income tax exemption.

The circular then laid down “characteristics” which would make an organization qualify for tax relief, covering educational institutions, religious and labor organizations, mutual savings associations, agricultural organizations, among others.

“There is nothing new there. That is already being practiced. What we are doing is merely to institutionalize the rules so that everyone knows it,” Henares said in a phone interview.

“It does not mean that you are registered as non-stock, you will be tax-exempt. The SEC registration is different from tax treatment,” Henares added.

Under the circular, non-stock, non-profit companies were reminded that only their income in their operations is tax-exempt, and that assets earned from other means are levied.

It said since granting tax exemption results into revenue losses, it will be up to the corporation to prove it is worthy of such relief.

“It (company) must thus demonstrate that its earnings or assets shall not inure to the benefit of any of its trustees, organizers, officers, members of any specific person,” the circular said.

Henares said the BIR would evaluate companies if they are worthy of exemption during their regular audits.

The outgoing BIR chief has been hit for her slew of regulations issued weeks before she steps down by June 30.

But Henares reiterated she is merely putting in black-and-white what is already being practiced “I am only putting everything on paper,” she said.

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KNOWING YOUR BIR REGULATIONS AND ISSUANCES

Revenue Regulations (RRs) are issuances signed by the Secretary of Finance, upon recommendation of the Commissioner of Internal Revenue, that specify, prescribe or define rules and regulations for the effective enforcement of the provisions of the National Internal Revenue Code (NIRC) and related statutes

Revenue Memorandum Orders (RMOs) are issuances that provide directives or instructions; prescribe guidelines; and outline processes, operations, activities, workflows, methods and procedures necessary in the implementation of stated policies, goals, objectives, plans and programs of the Bureau in all areas of operations, except auditing.

Revenue Memorandum Rulings (RMRs) are rulings, opinions and interpretations of the Commissioner of Internal Revenue with respect to the provisions of the Tax Code and other tax laws, as applied to a specific set of facts, with or without established precedents, and which the Commissioner may issue from time to time for the purpose of providing taxpayers guidance on the tax consequences in specific situations. BIR Rulings, therefore, cannot contravene duly issued RMRs; otherwise, the Rulings are null and void ab initio

Revenue Memorandum Circular (RMCs) are issuances that publish pertinent and applicable portions, as well as amplifications, of laws, rules, regulations and precedents issued by the BIR and other agencies/offices.

Revenue Bulletins (RB) refer to periodic issuances, notices and official announcements of the Commissioner of Internal Revenue that consolidate the Bureau of Internal Revenue's position on certain specific issues of law or administration in relation to the provisions of the Tax Code, relevant tax laws and other issuances for the guidance of the public.

BIR Rulings are official position of the Bureau to queries raised by taxpayers and other stakeholders relative to clarification and interpretation of tax laws.
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