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This document summarizes the tax exempt organizations under the National Internal Revenue Code of the Philippines. It lists 11 types of organizations that are not subject to income tax: 1) Labor, agriculture or horticulture non-profits, 2) Mutual savings banks and cooperative banks, 3) Fraternal beneficiary societies, 4) Cemetery companies, 5) Religious, charitable, scientific or cultural non-profits, 6) Business leagues and chambers of commerce, 7) Civic leagues, 8) Non-profit educational institutions, 9) Government educational institutions, 10) Mutual insurance companies and cooperatives, and 11) Farmers' marketing associations. However, the income from for-profit activities of these organizations is still
This document summarizes the tax exempt organizations under the National Internal Revenue Code of the Philippines. It lists 11 types of organizations that are not subject to income tax: 1) Labor, agriculture or horticulture non-profits, 2) Mutual savings banks and cooperative banks, 3) Fraternal beneficiary societies, 4) Cemetery companies, 5) Religious, charitable, scientific or cultural non-profits, 6) Business leagues and chambers of commerce, 7) Civic leagues, 8) Non-profit educational institutions, 9) Government educational institutions, 10) Mutual insurance companies and cooperatives, and 11) Farmers' marketing associations. However, the income from for-profit activities of these organizations is still
This document summarizes the tax exempt organizations under the National Internal Revenue Code of the Philippines. It lists 11 types of organizations that are not subject to income tax: 1) Labor, agriculture or horticulture non-profits, 2) Mutual savings banks and cooperative banks, 3) Fraternal beneficiary societies, 4) Cemetery companies, 5) Religious, charitable, scientific or cultural non-profits, 6) Business leagues and chambers of commerce, 7) Civic leagues, 8) Non-profit educational institutions, 9) Government educational institutions, 10) Mutual insurance companies and cooperatives, and 11) Farmers' marketing associations. However, the income from for-profit activities of these organizations is still
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