Summary
RMC No. 51-2014 clarifies the inurement prohibition under Section 30 of the NIRC of 1997 for non-stock and non-profit entities exempt from income tax.
Key points
- The prohibition. To qualify as exempt under Section 30, an entity’s earnings or assets must not inure to the benefit of any of its trustees, organizers, officers, members or any specific person.
- What counts as inurement. These are inurements: compensation, salaries or honorarium paid to trustees or organizers; exorbitant or unreasonable compensation to employees; welfare aid and financial assistance to members; and donations to any person or entity, except to entities formed for similar purposes.
- More inurements. Also covered are buying goods or services above fair market value from an entity in which a trustee, officer or fiduciary has an interest, and distributing remaining assets to trustees, organizers, officers or members upon dissolution and satisfaction of all liabilities.
Who is affected
- Non-stock and non-profit corporations, associations and organizations claiming exemption under Section 30
Deadlines and effectivity
- Issued June 11, 2014
Summary by Tax Resources PH. It is not a substitute for the full text of the issuance or professional advice.
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