MANILA – The Court of Tax Appeals (CTA) en banc affirmed its earlier ruling to set aside a tax assessment of PHP91.27 million against a microfinancing non-government organization (NGO) due to procedural lapses.
The en banc affirmed the June 20, 2014 decision of the CTA Second Division in favor of Valenzuela City-based Kabalikat Para sa Maunlad na Buhay Inc. (KMBI), which was ordered by the Bureau of Internal Revenue (BIR) in 2009 to pay the assessed amount for calendar year 2006, representing income tax, expanded withholding tax and value-added tax.
The CTA en banc ruling made public this week said the three-year period within which the BIR can issue an assessment for KMBI had lapsed.
“We arrived at the same conclusion that the final assessment notice and final letter of demand are void for having been issued beyond the prescriptive period set by law. Thus, this must be canceled,” the court said.
Still, the CTA maintained that NGOs engaged in money lending are required to pay value-added VAT on their earnings.
The court sided with the BIR position that NGOs’ microfinancing is a business or commercial activity subject to VAT under Section 105 of the Tax Code.
Even nonstock or nonprofit organization or government entities exempted from income tax are liable to pay VAT for any business undertaking.
"Lending money to the poor or otherwise does not negate the fact that the petitioner is still engaged in business for profit," the CTA said in a previous ruling. (PNA)