March BIR Rulings

MARCH 2012 BIR RULINGS BIR Ruling No. 157-2012 Handmaids of the House of God Inc. is a non-stock, non-profit religious institution. As such, it is exempt from paying taxes on all revenues and assets used actually, directly and exclusively for its purposes. However, income generated from activities that are not related to the exercise or performance by such educational institutions of their educational purposes or functions shall be taxed. Gross receipts from operations as a non-stock, non-profit institution shall likewise be exempt from VAT. However, activities involving sale of goods and services not in connection with its primary purposes are subject to the 12% VAT imposed or 3% percentage tax imposed if the gross sales do not exceed one million nine hundred nineteen thousand five hundred pesos. It is to be noted that the tax exemption granted to such an institution covers only income taxes for which it is directly liable. VAT, which is an indirect tax payable by the seller and not the purchaser of goods is a form of indirect tax. Once the burden is shifted to the buyer, it is considered an additional cost of goods or services sold. The institution cannot invoke its tax exemption privilege to avoid the passing or shifting of the VAT. As a non-stock, non-profit corporation, revenues and assets used in the operation of cafeterias/canteens and bookstores are exempt from taxation provided they are owned and operated by such institution as ancillary activities. Any donations, gifts or other contributions received by such institution are exempt from the payment of donors tax provided that not more than 30% of said gift shall be used for administration purposes. BIR Ruling No. 158-2012 Children’s Home Foundation (OCCHF), Inc., a non-stock, non-profit corporation, is engaged in providing a safe, nurturing and Christ-centered environment for children, offering a home for orphans and those children who have inadequate social and physical provision, and providing love and hope in a secure family environment. As a charitable institution, it is exempt from the payment of tax on income received by it as such organization. However, its 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. Likewise, interest income from currency bank deposits and yield or any other monetary benefit from deposit substitute instruments and from trust funds and similar arrangements, and royalties derived from sources within the Philippines are subject to the 20% final withholding tax: Provided, however, that interest income derived by it from a depository bank under the expanded foreign currency deposit system shall be subject to 7 ½% final withholding tax pursuant to Section 27(D)(1) in relation Section 57(A), both of the Tax Code of 1997. BIR Ruling No. 159-2012 Ilmoh Foundation (Integrated Learning for the Muslim and Highlander), Inc., a nonstock, non-profit corporation, is engaged, among others, in promoting the sustained

growth of peace and development in the poor, conflict affected and underprivileged areas through a systematic and responsive programs on Technical, vocational, literacy and Islamic education/training, civic welfare and other capability building programs and measures . As an organization exclusively for the promotion of social welfare, Ilmoh Foundation is exempt from the payment of tax on income received by it as such organization. However, its 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. Likewise, interest income from currency bank deposits and yield or any other monetary benefit from deposit substitute instruments and from trust funds and similar arrangements, and royalties derived from sources within the Philippines are subject to the 20% final withholding tax: Provided, however, that interest income derived by it from a depository bank under the expanded foreign currency deposit system shall be subject to 7 ½% final withholding tax pursuant to Section 27(D)(1) in relation Section 57(A), both of the Tax Code of 1997. BIR Ruling No. 166-2012 Pursuant to republic Act No. 9178, “An Act to Promote the Establishment of Barangay Micro Business Enterprises (BMBE’s), Providing Incentives and Benefits Therefor, and for Other Purposes”, D’RBG Marine Ex-Import, Inc., a domestic corporation organized to engage, buy and preserve marine products and sea foods for export, was awarded the Certificate of Authority for Barangay Micro-Business Enterprise. Inasmuch as D’RBG Marine Ex-Import, Inc., is a registered BMBE and was awarded BMBE Certificate of Authority by the City of Mandaue, it is therefore exempt from the payment of income tax for income arising from the operations of the enterprise for a period of two years from the date of issuance of the said certificate. BIR Ruling No. 214-2012 A merger of two corporations will qualify for non-recognition of gain or loss for income tax purposes provided that it is done for a bona fide business purpose and not for the purpose of escaping the burden of taxation. For VAT purposes the transfer of goods or properties which are originally intended for sale or for use in the course of business existing as of the effective date of merger will not be subject to any output tax, pursuant to Section 4.106-8(b)(3) of RR No. 16-2005, as amended by RR No. 4-2007, as further amended by RR No. 102011. Thus, any unused input tax as of the effective date of merger will be absorbed by the surviving corporation pursuant to RR No. 16-2005. No DST is due on the transfer made pursuant to the Plan of Merger. However, DST at the rate of P1.00 on each Php200 par value, or fractional part thereof, shall be imposed on the original issuance of shares by the surviving corporation to the stock holders of the absorbed corporation as a consequence of the merger as provided under Section 174 of the Tax Code, as amended. It is to be emphasized however, that the net operating loss carry-over (NOLCO) under Section 34(D)(3) of the Tax Code, as implemented by RR No. 14-2001, of the

absorbed corporation, is not one of the assets of the latter that can be transferred and absorbed by the surviving corporation as this privilege or deduction can be availed of merely by the absorbed corporation. Accordingly, the tax free merger does not cover the NOLCO of the absorbed corporation that can be transferred and absorbed by the surviving corporation. In order to avail of the foregoing privileges, the parties should comply with the requirements set forth under RR No. 18-2001. The parties moreover, shall enclose with their respective income tax returns for the taxable year in which the tax-free exchange occurred a copy of the request for ruling filed with, and the corresponding ruling issued by the BIR, both duly stamp received by the appropriate office of the BIR. Such persons shall include as a note to their respective audited financial statements for the taxable year in which the exchange occurred a statement to the effect that they hold such assets/shares acquired in a tax-free exchange and the year in which such exchange occurred, and in the taxable years until the subject properties are subsequently transferred to another transferee. The parties shall, cause to annotate at the back of the Certificates of Stock, the date the deed of exchange was executed, the original or historical cost of acquisition of the properties or shares of stock involved, and the fact that no gain or loss was recognized as a result of such exchange; provided however, that any violation by the Corporate Secretary of this condition shall be penalized under Section 275 of the same Code. It is further required that within ninety (90) days from the receipt of this ruling, the parties to the transaction must submit to the Law Division, BIR, a certified true copy by the Corporate Secretary, of duly annotated Certificates of Stock, in respect of the shares of the stock of transferee corporation. BIR Ruling No. 216-2012 Alamada Baptist Early Age Learning Center, Inc. is a non-stock, non-profit educational institution. As such, it is exempt from paying taxes on all revenues and assets used actually, directly and exclusively for educational purposes. However, income generated from activities that are not related to the exercise or performance by such educational institutions of their educational purposes or functions shall be taxed. Gross receipts from operations as a non-stock, non-profit educational institution shall likewise be exempt from VAT. However, activities involving sale of goods and services not in connection with its primary purposes are subject to the 12% VAT imposed or 3% percentage tax imposed if the gross sales do not exceed one million nine hundred nineteen thousand five hundred pesos. It is to be noted that the tax exemption granted to such an institution covers only income taxes for which it is directly liable. VAT, which is an indirect tax payable by the seller and not the purchaser of goods is a form of indirect tax. Once the burden is shifted to the buyer, it is considered an additional cost of goods or services sold. The institution cannot invoke its tax exemption privilege to avoid the passing or shifting of the VAT. As a non-stock, non-profit educational institution, revenues and assets used in the operation of cafeterias/canteens and bookstores are exempt from taxation provided they are owned and operated by such institution as ancillary activities. Any donations, gifts or other contributions received by such institution are exempt from the payment of donors tax provided that not more than 30% of said gift shall be used for administration purposes.

The tax exemption of a non-stock, non-profit institution, however, does not cover withholding taxes. As an educational institution, Alamada is constituted as withholding agent for the government required to withhold the tax on compensation income of its employees, or the withholding tax on income payments to persons subject to tax. BIR Ruling No. 225-2012 The exemption of a non-stock, non-profit educational institution from the payment of the 20% final tax and the 7.5% final tax on interest income from local and foreign currency bank deposits is subject to compliance with several conditions. As a tax exempt educational institution, it shall on an annual basis submit to the Revenue District Officer concerned an annual information return and duly audited financial statement together with the following: (a) Certification from its depository banks as to the amount of interest income earned from passive investment not subject to the 20% final withholding tax and 7.5% on interest income under the expanded foreign currency deposit system imposed by Section 27(D)(1) of the Tax Code of 1997; (b) Certification of actual utilization of the said income; and (c) Board Resolution by the school administration on proposed projects (i.e. construction and/or improvement of school buildings and facilities, acquisition of equipment, books and the like) to be funded out of the money deposited in banks or placed in money markets, on or before the 15th day of the fourth month following the end of its taxable year. BIR Ruling No. 228-2012 No gain or loss shall be recognized if a person transfers property to a corporation by a person, in exchange for stock in such a corporation of which as a result of such exchange, said person, alone or together with others, not exceeding four persons, gains control of said corporation. The term “control” means ownership of stocks in a corporation possessing at least 51% of the total voting power of all classes of stocks entitled to vote. In determining the 51% stock ownership, only those persons who transferred property for stocks in the same transaction may be counted to a maximum of five. It should be emphasized, that Section 40(C)(2) and (6)(c) of the Tax Code of 1997 merely defers recognition of the gain or loss from such transaction, for in determining the gain or loss from a subsequent transaction of the real properties or of the stocks involved in the exchange, the original or historical cost of the properties or stocks is considered. Thus, if any of the Assignors/Assignee later sell or exchange, they shall be subject to income tax/capital gains tax, as the case may be, on the gains they derived from such sale or exchange, taking into consideration that the cost basis of the shares/real properties shall be the same as the original acquisition cost or adjudged cost basis to the transferee of the properties exchanged therefor; and that the cost basis to the transferee of the properties exchanged for stocks shall be the same as it would be in the hands of the transferors. Under RR 20-2011 dated July 1, 2011, the exchange of goods or properties, including the real estate properties used in business or held for sale or for lease by

the transferor for shares of stock, whether resulting in corporate control or not is subject to VAT. In order that the parties to the exchange transaction can avail of the non-recognition of gains provided for in Section 40(C)(2) and (6)(c) of the Tax Code, they should comply with the following requirements hereunder: (A) The transferors must file with their income tax return for the taxable year in which the exchange transaction was consummated, a complete statement of all facts pertinent to the exchange, including: a. A description of the property they transferred, or of their interest in such property, with a statement of the original acquisition cost/adjusted cost basis or other basis thereof at the time of the transfer; b. The kinds of stocks received and preferences, if any; c. The number of shares of each class received; and d. The fair market value per share of each class at the date of the exchange. (B) On the other hand, the transferee corporation must file with its income tax return for the taxable year in which the exchange was consummated the following: a. A complete description of the property received from the transferors; b. A statement of the original acquisition cost or other basis of the property in the hands of the transferors and the adjusted cost basis thereof at the time of the transfer; and c. Information with respect to the capital stock of the corporation including: i. The total issued and outstanding capital stock immediately prior to and immediately after the exchange with a complete description of each class of stock; ii. The classes of stocks and number of shares issued to the transferors in the exchange; and iii. The fair market value as of the date of the exchange of the capital stock issued to the transferors. The parties moreover, shall enclose with their respective income tax returns for the taxable year in which the tax-free exchange occurred a copy of the request for ruling filed with, and the corresponding ruling issued by the BIR, both duly stamp received by the appropriate office of the BIR. Such persons shall include as a note to their respective audited financial statements for the taxable year in which the exchange occurred a statement to the effect that they hold such assets/shares acquired in a tax-free exchange and the year in which such exchange occurred, and in the taxable years until the subject properties are subsequently transferred to another transferee. BIR Ruling No. 215-2012 Inventors, under the Inventors and Invention Incentives Act of the Philippines as implemented by RR No. 19-92, are exempt from the payment of the following taxes for which otherwise you shall have been directly liable: (A) Income tax on the net income derived from the sale of invention products resulting from newly discovered/developed technologies by local researches or new technology adopted from foreign sources whether it be patented

machine, product, process including implements or tools and other related gadgets of invention, utility model and industrial design patents; (B) VAT on the gross receipts/revenues derived from the sale of said invention products, provided, however, that an inventor shall not be exempt from taxes for which he is not directly liable, e.g., VAT on his purchases of raw materials, supplies and equipment/machineries, which may be shifted to him as part of cost of goods sold or for services rendered; and (C) Excise taxes directly payable in connection with the sale of invention products. On the other hand, they are still liable to pay the following: (A) 20% final withholding tax on interest from Philippine currency bank deposits, yield or any monetary benefit from deposit substitutes, trust fund and similar arrangements; (B) Capital gains tax on sales of shares of stock prescribed under Section 21(d) of the Tax Code, as amended; (C) Capital gains on sales of real property prescribed under Section 21(e) of the Tax Code, as amended; (D) Income Tax on income not arising from the inventor’s productive activity such as interest, royalties, prizes, winnings and dividends; (E) Other percentage taxes under Title V of the Tax Code; and (F) DST on documents, instruments, and papers. The exemptions shall be during the first ten (10) years from the date of the first sale on a commercial scale, provided that this exemption privilege pertaining to the invention shall be extended to the legal heir or assignee upon the death of the inventor. BIR Ruling No. 231-2012 Under Section 60(B) of the Tax Code of 1997, employees’ trust which forms part of a pension, stock bonus, or profit-sharing plan of an employer for the benefit of some or all of his employees are exempt from income tax provided that the following requisites are complied with: (A) Contributions are made to the trust by such employer, or employees, or both for the purpose of distributing to such employees the earnings and principal of the fund accumulated by the trust in accordance with such plan; (B) Under the trust instrument it is impossible, at any time prior to the satisfaction of all liabilities with respect to employees under the trust, for any part of the corpus or income to be (within the taxable year or thereafter) used for, or diverted to, purposes other than for the exclusive benefit of his employees. Moreover, the trust is exempt from the coverage of withholding tax regulations. Interest income derived by the trust fund from investment in government securities, Philippine currency bank deposit, deposit substitutes and BSP special deposit accounts is exempt from the income tax and, consequently, from the final withholding tax pursuant to Section 60(B) of the Tax Code of 1997, as amended. It must be emphasized, however, that in its investment activities, no part of the corpus or income of the DBP Plans shall be used for or diverted to purposes other than for the exclusive benefit of the member-employees/officials or their beneficiaries.

BIR Ruling No. 168-2012 A non-stock, non-profit corporation requesting the issuance of certificate of tax exemption enjoyed by a civic league or organization not organized for profit but operated exclusively for the promotion of social welfare has to prove by actual operation for at least three (3) years that it is really an organization exempt from income tax under Section 30(G) of the Tax Code of 1997. Such an organization can file the necessary annual information return instead of an income tax return on or before the 15th day of the fourth month following the end of its taxable year as required under Section 24 of RR No. 2-40 dated February 10, 1940. Based on such information return, the BIR shall conduct the necessary investigation on the activities undertaken during the period. However, such an organization is subject to the corresponding internal revenue taxes imposed under the NIRC 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. Likewise, interest income from currency bank deposits and yield or any other monetary benefits from deposit substitute instruments and from trust funds and similar arrangements and royalties derived from sources within the Philippines are subject to the 20% final withholding tax: provided however, that interest income derived by it from a depository bank under the expanded foreign currency deposit system shall be subject to 7.5% final withholding tax pursuant to Section 27(D)(1), in relation to Section 57(A), both of the Tax Code of 1997. It is required to fine on or before the 15th day of the fourth month following the end of the accounting period a Profit and Loss Statement and Balance Sheet with the Annual Information Return under oath, stating its gross income and expenses incurred during the preceding period and a certificate showing that there has not been any change in it By-Laws, AOI, manner of operation and activities as well as sources and disposition of income. BIR Ruling No. 174-2012 The imposition of surcharge, penalties and interest on delinquency is mandatory. Strong reasons of policy support a strict observance of the rule regarding the payment of tax. The law imposing penalties for delinquencies are clearly intended to hasten tax payments or punish evasions or neglect of duty in respect thereof. If delays in the tax payments are to be condoned, for light reasons, the law imposing penalties for delinquencies would be rendered nugatory and maintenance of the government and its multifarious activities would be as precarious as taxpayers are willing or unwilling to pay their obligations to the state on time. BIR Ruling No. 180-2012 Income payments received by a BOI-registered project in connection with its registered activity are exempt from the creditable withholding tax imposed under RR No. 2-98 as amended by RR No. 6-2001, for a period of three (3) years. It must be emphasized, however, that the exemption from the creditable withholding tax covers only revenues generated from the registered activity. Furthermore, such exemption shall not cover revenues from units selling price exceeding Three Million Pesos (P3,000,000.00).

Moreover, its entitlement to ITH is not automatic, as it has still to comply with the Specific Terms and Conditions of the BOI Registration. Furthermore, BOI-registered enterprises enjoy no tax exemption/privileges other than those granted under E.O. 266. Moreover, the sale of residential lot valued at One Million Nine Hundred Nineteen Thousand Five Hundred Pesos (Php1,919,500.00) and below or house and lot, and other residential dwellings valued at Three Million One Hundred Ninety Nine Thousand Two Hundred Pesos (Php3,199,200.00) and below is VAT exempt. Thus, the sale of housing units with selling price of not more than the aforementioned price ceiling shall be exempt from VAT. BIR Ruling No. 182-2012 Suzuki Philippines requests for an authority to change method of computing depreciation of its Property, Plant and Equipment (PPE) from Sum-of-the-years-digit Method to Straight Line Method. According to Suzuki, the former method results in a decreasing charge of depreciation over the useful life of Suzuki Philippines’ asset which means that its depreciation expense is relatively higher during its initial years than its later years regardless of the volume it produced which tend to mismatch the revenue it earned. Under Section 34(F) of the Tax Code, there shall be allowed as a depreciation deduction a reasonable allowance for the exhaustion, wear and tear (including reasonable allowance for obsolescence) of property used in trade or business. The term reasonable allowance shall include but not limited to, an allowance computed in accordance with rules and regulations prescribed by the Secretary of Finance, upon recommendation of the BIR Commissioner under any of the following methods: (A) Straight Line Method; (B) Declining Balance Method, using rate not exceeding twice the rate which would have been used had the annual allowance been computed under the method prescribed in Subsection (F)(1); (C) Sum-of-the-years-digit Method; and (D) Any other method which may be prescribed by the Secretary of Finance upon recommendation of the BIR Commissioner. Section 105 and 109 of RR No. 2 should be read in consonance therewith. Given the existing conditions in the operation of Suzuki Philippines, this Office hereby grants the latter the permission to change its method of computing depreciation of its PPE from Sum-of-the-years-digit Method to Straight Line Method. BIR Ruling No. 185-2012 A non-stock, non-profit corporation requesting the issuance of certificate of tax exemption enjoyed by a civic league or organization not organized for profit but operated exclusively for the promotion of social welfare has to prove by actual operation for at least three (3) years that it is really an organization exempt from income tax under Section 30(G) of the Tax Code of 1997. Such an organization can file the necessary annual information return instead of an income tax return on or before the 15th day of the fourth month following the end of its taxable year as required under Section 24 of RR No. 2-40 dated February 10, 1940. Based on such information return, the BIR shall conduct the necessary investigation on the activities undertaken during the period.

However, such an organization is subject to the corresponding internal revenue taxes imposed under the NIRC 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. Likewise, interest income from currency bank deposits and yield or any other monetary benefits from deposit substitute instruments and from trust funds and similar arrangements and royalties derived from sources within the Philippines are subject to the 20% final withholding tax: provided however, that interest income derived by it from a depository bank under the expanded foreign currency deposit system shall be subject to 7.5% final withholding tax pursuant to Section 27(D)(1), in relation to Section 57(A), both of the Tax Code of 1997. It is required to fine on or before the 15th day of the fourth month following the end of the accounting period a Profit and Loss Statement and Balance Sheet with the Annual Information Return under oath, stating its gross income and expenses incurred during the preceding period and a certificate showing that there has not been any change in it By-Laws, AOI, manner of operation and activities as well as sources and disposition of income. BIR Ruling No. 170-2012 Family Christian Fellowship—Tagbilaran Inc., is a non-stock, non-profit educational institution. As such, it is exempt from paying taxes on all revenues and assets used actually, directly and exclusively for educational purposes. However, income generated from activities that are not related to the exercise or performance by such educational institutions of their educational purposes or functions shall be taxed. Gross receipts from operations as a non-stock, non-profit educational institution shall likewise be exempt from VAT. However, activities involving sale of goods and services not in connection with its primary purposes are subject to the 12% VAT imposed or 3% percentage tax imposed if the gross sales do not exceed one million nine hundred nineteen thousand five hundred pesos. It is to be noted that the tax exemption granted to such an institution covers only income taxes for which it is directly liable. VAT, which is an indirect tax payable by the seller and not the purchaser of goods is a form of indirect tax. Once the burden is shifted to the buyer, it is considered an additional cost of goods or services sold. The institution cannot invoke its tax exemption privilege to avoid the passing or shifting of the VAT. Any donations, gifts or other contributions received by such institution are exempt from the payment of donors tax provided that not more than 30% of said gift shall be used for administration purposes. The tax exemption of a non-stock, non-profit institution, however, does not cover withholding taxes. As an educational institution, Family Christian Fellowship is constituted as withholding agent for the government required to withhold the tax on compensation income of its employees, or the withholding tax on income payments to persons subject to tax. BIR Ruling No. 187-2012 The entitlement of women employees of special leave benefits of two (2) months with full pay based on the gross monthly compensation following surgery caused by gynecological disorder pursuant to Section 21(B) of the IRR of the Magna Carta of

Women (RA 9710) is not considered as a compensation for injuries or sickness which is excluded from gross income and is exempt from taxation as provided under Section 32(B)(4) of the NIRC. BIR Ruling No. 188-2012 Income payments received by a BOI-registered project in connection with its registered activity are exempt from the creditable withholding tax imposed under RR No. 2-98 as amended by RR No. 6-2001, for a period of four (4) years. It must be emphasized, however, that the exemption from the creditable withholding tax covers only revenues generated from the registered activity. Furthermore, such exemption shall not cover revenues from units selling price exceeding Three Million Pesos (P3,000,000.00). Moreover, its entitlement to ITH is not automatic, as it has still to comply with the Specific Terms and Conditions of the BOI Registration. Furthermore, BOI-registered enterprises enjoy no tax exemption/privileges other than those granted under E.O. 266. Moreover, the sale of residential lot valued at One Million Nine Hundred Nineteen Thousand Five Hundred Pesos (Php1,919,500.00) and below or house and lot, and other residential dwellings valued at Three Million One Hundred Ninety Nine Thousand Two Hundred Pesos (Php3,199,200.00) and below is VAT exempt. Thus, the sale of housing units with selling price of not more than the aforementioned price ceiling shall be exempt from VAT. BIR Ruling No. 189-2012 Donations to a social welfare corporation is exempt from the payment of donor’s tax pursuant to Section 101(A)(3) of the Tax Code of 1997, subject to the condition that not more than thirty percent (30%) of said gift shall be used for administration purposes. Moreover, the Deed of Donation is not subject to DST under Section 196 of the Tax Code of 1997, as amended, but only to the DST of Php15.00 on certification under Section 188 of the same Code. BIR Ruling No. 195-2012 Minimum wage earners as defined under RA 9504 are exempt from the payment of income tax on their taxable income and that the holiday pay, overtime pay, night shift differential pay and hazard pay received by such minimum wage earners shall likewise be exempt from income tax. Moreover, they are entitled to the refund of excess withholding tax from the employer, if any, as computed under RR 2-98, as amended, from the effectivity of RA 9504. BIR Ruling No. 196-2012 Dividends received by non-resident foreign corporations from a domestic corporation shall be subject to a withholding tax of 15% of the dividends received subject to the condition that the country in which the non-resident foreign corporation is domiciled shall allow a credit against the tax due from the non-resident foreign corporation, taxes deemed to have been paid in the Philippines equivalent to 20% which represents the difference between the regular tax (35%) on corporations and the tax (15%) on dividends. Thus, if the country of domicile of the recipient corporation allows as credit against the tax imposable by it an amount equivalent to 20% of the

dividends remitted to corporation domiciled therein, the dividends so remitted are subject to a withholding tax at the rate of 15% only.

BIR Ruling No. 197-2012 Income payments received by a BOI-registered project in connection with its registered activity are exempt from the creditable withholding tax imposed under RR No. 2-98 as amended by RR No. 6-2001, for a period of four (4) years. It must be emphasized, however, that the exemption from the creditable withholding tax covers only revenues generated from the registered activity. Furthermore, such exemption shall not cover revenues from units selling price exceeding Three Million Pesos (P3,000,000.00). Moreover, its entitlement to ITH is not automatic, as it has still to comply with the Specific Terms and Conditions of the BOI Registration. Furthermore, BOI-registered enterprises enjoy no tax exemption/privileges other than those granted under E.O. 266. Moreover, the sale of residential lot valued at One Million Nine Hundred Nineteen Thousand Five Hundred Pesos (Php1,919,500.00) and below or house and lot, and other residential dwellings valued at Three Million One Hundred Ninety Nine Thousand Two Hundred Pesos (Php3,199,200.00) and below is VAT exempt. Thus, the sale of housing units with selling price of not more than the aforementioned price ceiling shall be exempt from VAT. BIR Ruling No. 199-2012 Dividends received by non-resident foreign corporations from a domestic corporation shall be subject to a withholding tax of 15% of the dividends received subject to the condition that the country in which the non-resident foreign corporation is domiciled shall allow a credit against the tax due from the non-resident foreign corporation, taxes deemed to have been paid in the Philippines equivalent to 20% which represents the difference between the regular tax (35%) on corporations and the tax (15%) on dividends. Thus, if the country of domicile of the recipient corporation allows as credit against the tax imposable by it an amount equivalent to 20% of the dividends remitted to corporation domiciled therein, the dividends so remitted are subject to a withholding tax at the rate of 15% only. BIR Ruling No. 203-2012 Mercedes Oliver Scholarship Foundation, Inc. is a non-stock, non-profit institution. As such, it is exempt from paying taxes on all revenues and assets used actually, directly and exclusively for its purposes. However, income generated from activities that are not related to the exercise or performance by such educational institutions of their educational purposes or functions shall be taxed. Gross receipts from operations as a non-stock, non-profit institution shall likewise be exempt from VAT. It is to be noted that the tax exemption granted to such an institution covers only income taxes for which it is directly liable. VAT, which is an indirect tax payable by the seller and not the purchaser of goods is a form of indirect tax. Once the burden is shifted to the buyer, it is considered an additional cost of goods or services sold. The institution cannot invoke its tax exemption privilege to avoid the passing or shifting of the VAT. Section 105 of the Tax Code provides that

any person who, in the course of trade or business, sells, barters, exchanges, leases goods or properties, renders services, and any person who imports goods shall be subject to the VAT imposed under Sections 106 to 108 of the same Code. Its purchase of goods or properties or services and importation of goods shall nevertheless be subject to the 12% VAT pursuant to Section 107 of the said Code. Any donations, gifts or other contributions received by such institution are exempt from the payment of donors tax provided that not more than 30% of said gift shall be used for administration purposes. BIR Ruling No. 208-2012 Under RA No. 7279, landowners who sold their properties for use in a socialized housing project are exempt from the payment of capital gains tax. However, the DST is not one of the taxes covered by the tax exemption clause in Section 20 of RA 7279. BIR Ruling No. 209-2012 Income payments received by a BOI-registered project in connection with its registered activity are exempt from the creditable withholding tax imposed under RR No. 2-98 as amended by RR No. 6-2001, for a period of four (4) years. It must be emphasized, however, that the exemption from the creditable withholding tax covers only revenues generated from the registered activity. Furthermore, such exemption shall not cover revenues from units selling price exceeding Three Million Pesos (P3,000,000.00). Moreover, its entitlement to ITH is not automatic, as it has still to comply with the Specific Terms and Conditions of the BOI Registration. Furthermore, BOI-registered enterprises enjoy no tax exemption/privileges other than those granted under E.O. 266. Moreover, the sale of residential lot valued at One Million Nine Hundred Nineteen Thousand Five Hundred Pesos (Php1,919,500.00) and below or house and lot, and other residential dwellings valued at Three Million One Hundred Ninety Nine Thousand Two Hundred Pesos (Php3,199,200.00) and below is VAT exempt. Thus, the sale of housing units with selling price of not more than the aforementioned price ceiling shall be exempt from VAT. BIR Ruling No. 210-2012 With the issuance of RMC No. 18-2011 (Income Tax Exemption of Interest Income Earning from Long Term Deposits or Investment Certificates Under Sec. 24(B)(1) and 25(A)(2) of the NIRC as amended) dated 12 April 2011, the issuance of a BIR Ruling is not necessary as the taxability of the interest income from long-term deposits or investments is dependent on the full compliance of the requisites, otherwise, a final tax of twenty percent (20%) shall be imposed. BIR Ruling No. 213-2012 RA 9301 provides that a Philippine shipping enterprise shall be exempt from the payment of income tax on income derived from Philippine overseas shipping for a period of ten (10) years from the date of approval of this Act, provided that:

(A) The entire net income, after deducting not more than fifteen percent (15%) thereof for distribution of profits or declaration of dividends, which would otherwise be taxable under the provisions of Title II of the NIRC, is reinvested for the construction, purchase, or acquisition of vessels and related equipment and/or in the improvement or modernization of its vessels and related equipment in accordance with the regulation; and (B) The cumulative amount so reinvested shall not be withdrawn for a period of seven (7) years after the expiration of the period of income tax exemption or until the vessel or related equipment so acquired have been fully paid, which ever date comes earlier. Any amount not so invested or withdrawn prior to the expiration of the period stipulated herein shall be subject to the corresponding income tax, including penalties, surcharges and interests.