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Digest of RMO 34-2014: On Clarifications of Certain Provisions of RMO No. 20-2013

October 2014

Revenue Memorandum Order (RMO) 34-2014 issued on September 18, 2014 clarifies certain provisions of RMO No. 20-2013, as amended by RMO No. 28-2013, on the issuance of Tax Exemption Rulings for qualified non-stock, non-profit corporations and associations under Section 30 of the Tax Code. It explains that the purpose for application of Tax Exemption Rulings by such non-stock, non-profit entities are for verification whether said entities satisfied the requirements for tax exemption under the Tax Code. Moreover, Tax Exemption Rulings encompass the appropriate tax treatment for activities entered into by non-stock, non-profit entities other than the purpose for which they exist (e.g., taxable transactions).

The RMO also discusses the consequences for non-filing, late filing or revocation of Tax Exemption Rulings. Non-stock, non-profit entities that fail to obtain a Tax Exemption Ruling shall prove compliance with the conditions required by the law and other relevant administrative issuances in the event of a tax investigation. For failure to renew Tax Exemption Rulings, non-stock, non-profit entities may still apply with the Revenue District Office (RDO) where they are registered without need to present the previously issued tax exemption ruling or certificate. Failure of non-stock, non-profit entities to issue Tax Exemption Rulings to withholding agents shall make the income payments subject to applicable withholding tax. On the other hand, failure of withholding agents to withhold despite lack of Tax Exemption Ruling shall cause imposition of penalties under Section 251 and other relevant sections of the Tax Code.

Umbrella Organizations or confederations duly recognized by the Bureau on behalf of any of its members-non-stock, non-profit entities may file tax exemption rulings subject to the submission of the appropriate Board Resolution authorizing said organization or confederation to file the said application and in accordance with the guidelines/documentary requirements prescribed under RMO No. 20-2013.