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June 10, 1998 the Tax Code, as amended].

Accordingly, it is exempt from the

BIR RULING [DA-231-98] payment of income tax on income received by it as such
Sisters of the Order of the Company of Mary Our Lady organization, and therefore, need not file an income tax return
Corner 15th-9th St. Nazareth concerning such income. However, it is subject to the corresponding
9000 Cagayan de Oro City internal revenue taxes imposed under the Tax Code of 1997 on its
Attention: Sr. Luz Eugenia Vallejo, O.D.N . income derived from any of its properties, real or personal, or any
Superior activity conducted for profit regardless of the disposition thereof,
Gentlemen : which income should be returned for taxation. Accordingly, interest
This refers to your letter dated August 12, 1997 in relation to your income from currency bank deposits and yield or any other monetary
application for registration as a Donee Institution under B.P. Blg. 45, benefits from deposit substitute and from trust funds and similar
as implemented by BIR-NEDA Regulations No. 1-81, as amended. arrangements are subject to the 20% final withholding tax pursuant
cdta to Section 27(D)(1) in relation to Section 57(A), both of the Tax
Documents submitted to this Office disclosed that the Sisters of the Code of 1997. (BIR Ruling No. 4-90 dated January 12, 1990) cdtai
Order of the Company of Mary Our Lady (O.D.N.) is an international Section 101(A)(3) of the Tax Code of 1997 provides that donations
religious congregation present only in Cagayan de Oro City; that it is a in favor of an educational and/or charitable, religious, cultural or
non-stock, non-profit institution registered with the Securities and social welfare corporation, institution, accredited non-government
Exchange Commission under SEC Reg. No. 129015 dated October 4, organization, trust or philanthropic organization or research
1985; that one of its objectives is to acquire, hold and dispose of such institution are exempt from the payment of donor's tax subject to the
personal and real properties as may be conveyed to or acquired by the condition that not more than 30% of the said gifts shall be used by it
said corporation sole and to have the power to donate, grant, convey, for administration purposes.
cede, lease, mortgage or exchange or otherwise dispose of any or all of Furthermore, Section 34(H)(2)(c) of the Tax Code of 1997 [then Sec.
such properties subject to the provisions of existing laws of the 29(h)(2)(C) of the Tax Code, as amended and as implemented by
Republic of the Philippines and the Order of the Company of Mary BIR-NEDA Regulations No. 1-81, as amended by Revenue
Our Lady; that its source of income are donations from the Regulations Nos. 1-82 and 10-82], provides that donations to a non-
congregation's Provincial Level/Government and co-sisters based in government organization which means a non-profit domestic
Japan and from the honoraria of its sisters working in different corporation or association organized and operated exclusively for
institutions; that its activities include pastoral activities especially for scientific, research, educational, character building and youth and
the young people such as catechesis, retreats and recollections; and sports development, health, social welfare, cultural or charitable
that it has never entered into any employee-employer relationship and purposes or a combination thereof, no part of the net income of
has therefore never withheld any tax from any individual or group of which inures to the benefit of any private individual shall be
persons. deductible in full from the taxable business income of the donor,
In reply, please be informed that this Office is of the opinion that the provided however, that the accredited NGO has complied with the
Sisters of the Order of the Company of Mary Our Lady (O.D.N.) falls level of administration expenses and utilization requirements as
within the purview of a corporation organized for religious, charitable, provided for under the said Section.
cultural and social welfare purposes as contemplated under Section It should be understood that the organization shall be constituted as
30(E) and (G) of the Tax Code of 1997 [then Section 26(e) and (g) of 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,

Deputy Commissioner
(Legal and Enforcement Group)