BIR Ruling [DA-017-99]

January 11, 1999 BIR RULING [DA-017-99] Southeast Asian Regional Center for Graduate Study and Research in Agriculture (SEARCA) College, Los Baos, Laguna 4031 Attention: Mr . Francisco P . Fellizar, Jr . Deputy Director Gentlemen : This refers to your letter dated March 2, 1998 requesting, in effect, for a ruling that SEARCA is exempt from the payment of the final withholding tax on its income derived from its bank deposits. It is represented that SEARCA is a non-stock, non-profit educational institution based in College, Los Baos, Laguna; that it has the following functions: a) To provide high quality study programs in agriculture leading to master's and doctor's degrees; b) To provide graduate scholarships, fellowships, and/or assistantships for students from SEAMEC countries; c) To promote, undertake, and coordinate research programs as instituted and supported by the Center, with special emphasis on research relevant to the needs and pressing problems of agriculture in Southeast Asia; d) To provide direction and funds for research by graduate students, faculty members, and other cooperating research workers of member countries; e) To publish the findings of agricultural research done in the region, or other pertinent research done elsewhere; f) To hold seminars on selected agricultural problems and topics; g) To provide advisory and consultative services to member countries through staff visits and exchanges, seminars, and participation in national training and extension programs; and h) To stimulate and assist further development of agricultural institutions in Southeast Asia and to enlist their efforts in a concerted attack on agricultural problems of the region. that it is distinctly international in character; that it was organized by virtue of an international agreement signed by representatives of Southeast Asian member countries; that it was established pursuant to the Charter of the Southeast Asian Ministries of Education Organization (SEAMEO) formed on February 7, 1968 by the Ministries of Education of member states; and that in CTA Case No. 4982 entitled "Southeast Asian Regional Center For Graduate Study and Research in Agriculture (SEARCA), Petitioner, vs. Commissioner of Internal Revenue, Respondent", the Court of Tax Appeals granted the Petition filed by SEARCA to enforce a claim for refund of the 20% final withholding tax on interest earned from savings and time deposits for the period covering the years 1991 to 1992, in its decision promulgated on October 6, 1995 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 which decision became final and executory in a Resolution issued on June 5, 1996 by the Court of Tax Appeals on the said case. In reply, please be informed that on the basis of the Court of Tax Appeals' decision in CTA Case No. 4982 which became final and executory on June 5, 1996 declaring SEARCA to be both international organization and an educational institution at the same time whose assets (deposits) are actually, directly and exclusively used for educational purposes (i.e., giving quality education in the field of agriculture), this Office is of the opinion that SEARCA is exempt from the final withholding tax of 20% on the interest income derived from its savings and time deposits. (BIR Ruling No. ENPS-004-98 dated March 12, 1998) LLjur Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)