July 4, 2018

Dear Frederique and Father Bernard,

I will explain to you where we are in our Tax Exemption application. This is also the
first time that I learn about the status of our Application because of the Notice we
received from the Bureau of Internal Revenue (“BIR”). Please be patient in reading this
letter and I will use as simple English as possible.

The general rule is, for any corporation to be exempted from corporate tax, the
corporation needs to apply for Tax Exemption from the Bureau of Internal Revenue
(“BIR”). The BIR issues a Tax Exemption Certificate which serves as proof that a
Corporation is tax exempt.

Obviously, we applied for Tax Exemption. I asked Mary the details about this
application. Who was/were the party(ies) involved in the application and what did
they accomplish? Where are we in the application? Why did the BIR ask for other
documents if we already applied?

Mary’s answers shed light to my questions and I hope they will enlighten you as well as
to where we are and what we should do.

The application for Tax Exemption was supposed to be a coordination between the
accountant(s) and the lawyer of the company/corporation. The Accountant prepares
the accounting documents such as the Annual Information Returns and Financial
Statements. On the other hand, the lawyer prepares the letter(s), checks the provisions
of law if Tax rules are followed, and provides the necessary corporate documents as
part of the requirements.

Take note, we submitted our Tax-Exempt application on April 6, 2015. In fact, the BIR
Regional District Office(“RDO”) in Quezon City received our application on the same
date. This was confirmed by Mary and she has a document to prove this. Who were
supposed to be in charge? Who were the accountant(s) and the lawyer when the
application was made? At that time, we engaged the legal services of Atty. Bangui and
the accounting services of Dimaculangan Accounting firm.

What is unique with the Taxing system in the Philippines is that every person - natural
or juridical, is assigned to every Revenue District Office (“RDO”). In Quezon City alone,
for example, there are at least three (3) Revenue District Offices (“RDOs”). Each of these
RDOs submits all applications to the BIR Regional Office or the BIR National Capital
Region (since Manila is part of the National Capital Region). Then from the Region, the
application goes to the BIR National Office. The BIR National Office issues the BIR Tax
Exempt Certificate. The RDOs and the Regional offices check the requirements of the
application.

Why am I telling this? Simple. So that we know where we are in our application.
Dimaculangan Accounting Firm submitted our application in the Regional District
Office (RDO) on April 6, 2015. The RDO submitted/forwarded our application to the
BIR Region on April 8, 2016. Yes! After one year!

What happened? The BIR Regional Office RETURNED our application to the RDO.
Why? Because they said we are lacking certain documents! Now, how did this happen?
I entertain two possibilities:

1) Our Accounting Firm did not submit ALL the required documents; OR
2) We submitted all documents but CERTAIN documents were lost by the BIR!

Thus, when our application was returned where we originally filed it, the RDO wrote
us the letter we received on July 2. The letter states that we NEED to submit certain
documents in order to be TAX EXEMPT, or else, the government will impose its normal
corporate tax which 30% of the net income of Bayard or 2% gross income, whichever is
higher.

Finally, here is my humble opinion of what we should do since we cannot blame or ask
from our previous counsel or accounting firm. I propose the following, Mary and I will
closely coordinate the preparation of the documents for application and THIS TIME, a
lawyer will closely monitor the accountant if the documents required are indeed
COMPLETE and CORRECT.

Here is the list the documents that we are lacking according to the letter. I am sorry to
say but we need to BEGIN WITH THE PROCESS AGAIN. But this time, I will closely
monitor each of the preparation and submission of the documents. Here they are:

Document missing: Status – available Person-in-charge Course of action:

or not in Bayard?
1. Original Copy of Not available JP Mary will send a
Application Letter sample and JP
will make the
letter.
2. Certified True Copy Available JP WE will submit
of the Latest Articles the ORIGINAL.
and By-laws
3. Original Copy of Not available JP Mary will send a
Certification Under sample
Oath by an Executive Certificate. JP
Officer of the will make one.
 corporation or
association as to (i) all
previous
amendments/change
s in the Articles of
Incorporation and By-
Laws
4. Certified True Copies Not available JP/Mary Mary will ask
of the Income Tax Tagnia
Returns or Annual Accounting
Information Returns Firm for the
Original Copy;

Bayard
messenger will
go to the BIR to
make Xerox
copies Certified
true copies
5. Original copy of a Not available JP Mary to give JP
statement under Oath a sample. JP will
by an executive make.
officer of the
corporation or
association as to its
modus operandi

Our deadline is on July 17 so we hope to submit at least the documents we can. I am

going to make the Cover Letter of the submission.

Please be guided accordingly. If you have any question, please feel free to ask.

Thank you very much.

Sincerely,
Jaypee