BIR Ruling [DA-013-02]

January 30, 2002 BIR RULING [DA-013-02] Southeast Asian Regional Center for Graduate Study and Research in Agriculture (SEARCA) College, Los Baos, Laguna Attention: Lilia T. Habacon Head, Administration Gentlemen : This refers to your letter dated October 29, 2001 requesting this Office to issue a certificate of tax exemption in favor of SEAMEO Regional Center for Graduate Study and Research in Agriculture (SEAMEO SEARCA), from payment of the 20% final tax on interest earnings derived from treasury bonds, treasury bills and other bank notes. It is represented that SEARCA is a non-stock, non-profit educational institution located at 4031 College, Laguna. It was established through an enabling instrument in accordance with the Charter of the Southeast Asian Ministers of Education Organization formed by the Ministers of Education of the Philippines, Indonesia, Malaysia, Laos, Singapore and Thailand, in order to provide high quality graduate education and training in agriculture in the region. The request for issuance of certificate of exemption is anchored on the decision of the Court of Tax Appeals in CTA Case No. 4982, entitled "Southeast Asian Regional Center for Graduate Study and Research in Agriculture (SEARCA) vs. Commissioner of Internal Revenue wherein the said Court ruled, by adopting the views and interpretations of both the Secretary of Justice (DOJ Opinion No. 71; S, 1994) and the Secretary of Education that SEARCA is both an international organization and educational institution at the same time, hence qualified to be exempt from the 20% final withholding tax on interest derived from savings and time deposit pursuant to the provision of Section 4(3) of Article XIV of the 1987 Constitution. Said decision became final and executory in a Resolution issued on June 5, 1996 by the Court of Tax Appeals. In reply, please be informed that on the basis of the aforecited decision, this Office is of the considered opinion that SEARCA is exempt from payment of the 20% final tax on interest earnings derived from treasury bonds, treasury bills and other bank notes. In conformity with the dictum of the Court of Tax Appeals with regard to savings and time deposit, the treasury bills, treasury bonds and other bank notes of SEARCA also form part of its (SEARCA) assets used for educational purposes. As such, it is exempt from tax by virtue of the proviso of Section 4(3) Article XIV of the 1987 Constitution which reads: "(3) All revenues and assets of non-stock, non-profit educational institutions used actually, directly, and-exclusively for educational purposes shall be exempt from taxes and duties . Upon the dissolution or cessation of the corporate existence of such institutions, their assets shall be disposed of in the manner provided by law. xxx xxx xxx This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation it shall be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) MILAGROS V. REGALADO Acting Assistant Commissioner Legal Service