BIR Ruling [DA-040-04]

February 4, 2004 BIR RULING [DA-040-04] 109 (M) VAT 054-62 Atty. Ferdinand M. Mangahas c/o 2/F Security Bank Building No. 228 Ortigas Avenue San Juan, Metro Manila S i r : This refers to your letter dated August 11, 2003 requesting for an opinion as to whether or not TESDA recognized or accredited institutions organized as stock corporations are exempted from value-added tax under Section 109(m) of the Tax Code of 1997. It appears that the Education Act of 1982 created the Ministry of Education, Culture & Sports which later became the Department of Education, Culture & Sports in 1987 by virtue of Executive Order No. 117; that pursuant thereto, the organization of the Ministry shall consist of: (a) the Ministry Proper composed of the immediate Office of the Minister, and the Services of the Ministry; (b) the Board of Higher Education; (c) the Bureau of Elementary Education, the Bureau of Secondary Education, the Bureau of Higher Education, the Bureau of Technical and Vocational Education, and the Bureau of Continuing Education; (d) Regional offices and field offices; (e) the National Scholarship Center and such other agencies as are or may be established pursuant to law; and (f) the cultural agencies, namely the National Library, the National Historical Institute, the National Museum, and the Institute of National language; that the structure of DECS as embodied in E.O. 117 has practically remained unchanged until 1994, when the Commission on Higher Education (CHED), and 1995 when the Technical Education and Skills Development Authority (TESDA), were respectively established; that the Congressional Commission on Education (EDCOM) report provided the impetus for Congress to pass RA 7722 and RA 7796 in 1994 creating the CHED and the TESDA, respectively; that the trifocal education system refocused DEC's mandate to basic education which covers elementary, secondary and non-formal education, including culture and sports; and that TESDA now administers the post-secondary, middle-level manpower training and development while CHED is responsible for higher education. In reply thereto, please be informed that Section 109(m) of the Tax Code of 1997 provides that educational services rendered by private educational institutions, duly accredited by the Department of Education, Culture and Sports (DECS) and the Commission on Higher Education (CHED), and those rendered by government educational institutions are exempt from value-added tax. IcDHaT In VAT Ruling No. 054-02 dated September 12, 2002, this Office ruled that ". . . it is clear under Section 109(m) of the Tax Code of 1997 that educational services rendered by private educational institution shall be exempted from VAT if it is duly accredited by DECS or by CHED. No law explicitly provides that an accreditation by TESDA is tantamount to an accreditation by DECS or CHED. The provisions of Section 7 of Republic Act No. 7796 (TESDA Act of 1994) mandating the inclusion of the Secretary of Education, Culture and Sports as Co-Chairperson of the TESDA Board does not operate as a delegation of an authority to accredit private educational institutions to the TESDA for VAT-exemption purposes. Therefore, the educational services rendered by GITECH shall be subject to VAT. "xxx xxx xxx" IN VIEW WHEREOF, this Office holds that services rendered by educational institutions accredited by TESDA are subject to the 10% value-added tax. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group