SGV & Co.

February 13, 2007 BIR RULING [DA-087-07] BIR Ruling No. DA-292-03 SGV & Co. 6760 Ayala Avenue Makati City Attention: Atty. Mark Anthony P. Tamayo Partner, Tax and Customs Services Gentlemen : This refers to your letter dated November 21, 2006 requesting on behalf of your client, Brent International School Manila, Inc. ("Brent" for brevity") for a ruling that interest income on Brent's local bank deposits used actually, directly and exclusively in pursuance of Brent's purpose as an educational institution is exempt from the 20% final withholding tax and the 7-1/2% tax on interest income under the expanded foreign currency deposit system. As represented, Brent is private, non-stock, non-profit international educational institution associated with the Episcopal Church in the Philippines. It is registered with the Securities and Exchange Commission (SEC) under SEC Registration No. A1996-10715 issued on March 16, 1999. Its primary purpose "to establish a school of international character giving instructions to children and/or dependents of foreign diplomatic personnel, other expatriates, other foreign temporary residents and Filipinos in a number specified in the guidelines issued by the Department of Education, Culture and Sports, on June 22, 1988, pursuant to Presidential Decree 2022, irrespective of nationality and creed, in arts, science and other studies embraced in kindergarten, primary intermediate and high school course of instruction." The school was accredited as a college preparatory school by Western Association of Schools and Universities (PAASCU); it is also recognized by then Department of Education, Culture and Sports (now Department of Education). Brent maintains local bank deposits as well as foreign currency deposits in the Philippines for activities and purposes which are actually, directly and exclusively in the pursuance of its functions as an educational institution. In reply, please be informed that under Department Order No. 149-95 dated November 24, 1995 amending Department Order No. 137-87, interest income from currency bank deposits and yield from deposits substitute instruments used actually, directly and exclusively in pursuance of the educational purpose of the institution is exempt from the 20% final tax and 7-1/2% tax on interest income under the expanded foreign currency deposit system imposed under Section 27 (D) (1) of the Tax Code of 1997 subject to compliance with the conditions that as a tax-exempt educational institution it shall on an annual basis submit to the Revenue District Office concerned an annual information return and duly audited financial statement together with the following: a) Certification from its depository bank as to the amount of interest income earned from passive investment not subject to the 20% final withholding tax and 7-1/2% tax on interest income under the expanded foreign currency deposit system imposed by Section 27 (D) (1) of the 1997 Tax Code; b) Certification of actual utilization of the said income; and c) Board Resolution by the school administration on proposed projects (i.e., construction and/or improvement of school buildings and facilities, acquisition of equipment, books and the like) to be funded out of the money deposited in banks or placed in money markets, on or before the 15th day of the fourth month following the end of its taxable year (Sec. 4, Finance Department Order No. 137-87; ENPS-012-98 dated November 25, 1998; and BIR Ruling No. 46-00 dated September 26, 2000) In view of the foregoing, interest income from currency bank deposits and yield from deposit substitute instruments and under the expanded foreign currency deposit system derived by Brent in pursuance of its purpose as an educational institution is respectively exempt from the payment of the 20% and 7.5% final tax. EcTaSC 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, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service