On November 15, 2024, the BIR issued Revenue Memorandum Circular No. 123-2024 to clarify the validity of the issuance of the Certificate of Tax Exemption (CTE) to certain tax-exempt corporations.
The new BIR RMC emphasizes that under Revenue Memorandum Order No. 38-2019, only the following entities shall process the CTE, which shall be valid for a period of three years from its effective date, unless revoked or cancelled:
a. Labor, agricultural, or horticultural organization not organized principally for profit;
b. Mutual savings bank with no capital stock represented by shares and cooperative banks without capital stock, organized and operated for mutual purposes and without profit;
c. 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 a mutual aid association or a non-stock corporation organized by employees providing life, sickness, accident, or other benefits exclusively to members or their dependents;
d. Cemetery companies owned and operated exclusively for the benefit of its members;
e. Non-stock corporations or associations organized and operated exclusively for religious, charitable, scientific, athletic, or cultural purposes, or for the rehabilitation of veterans, where no part of their net income or assets inures to the benefit of any member, organizer, officer, or any specific person;
f. Business league, chamber of commerce, or board of trade, not organized for profit and with no part of their net income benefiting any private stockholder or individual;
g. Civic league or organization not organized for profit but operated exclusively for the promotion of social welfare;
h. A non-stock and non-profit educational institution;
i. Government educational institution;
j. 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 to meet their expenses; and
k. Farmers', fruit growers', or like associations organized and operated as a sales agent to market the products of their members and return the proceeds of sales, less the necessary selling expenses based on the quantity of produce supplied.
The newly issued RMC also clarifies that the three-year validity period in RMO No. 38-2019 does not apply to CTEs issued to the following corporations:
a. Non-stock and non-profit educational institutions as provided under Section 30(H) of the Tax Code and RMO No. 044-2016;
b. Homeowners' Association as provided under Republic Act (RA) No. 9904 and (RMC) No. 09-2013, as amended;
c. Non-stock savings and loan association as provided under RA No. 83672 and RMC No. 9-2016; and,
d. Certificate of Qualification issued for employees’ retirement benefit plans under RA No. 4917 and Revenue Regulations (RR) No. 1-1968, as amended by RR No. 1-1983.
Consequently, the CTEs issued to these corporations remain valid unless revoked by the BIR for valid reasons.
Please be guided accordingly.
Source:
P&A Grant Thornton
Certified Public Accountants
P&A Grant Thornton is the Philippine member firm of Grant Thornton International Ltd.
As published in SunStar Cebu, dated 04 December 2024
