BIR Ruling [DA-088-96]

February 28, 1996 BIR RULING [DA-088-96] MEMORANDUM FOR : Mr. Antolin L. Naguiat Executive Assistant Office of the Secretary Department of Finance Manila FROM : Liwayway Vinzons-Chato Commissioner of Internal Revenue SUBJECT : Passage of law exempting proprietary schools from tax. Schools whether proprietary or non-stock are in fact helping government in one of its function to develop the human resource through education COMMENTS: There is no problem with respect to non-stock, non-profit private educational institutions insofar as taxes and duties are concerned since paragraph 3, Section 4, Article XIV of the 1987 Philippine Constitution, which was ratified on February 2, 1987 explicitly provides that "(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. . . ." although these non-stock, non-profit educational institutions are subject to internal revenue on income from trade, business or other activity the conduct of which is not related to the exercise or performance by such educational institution of its educational purpose or function." (Sec. 2 (2.1) Department Order No. 149-95 amending Department Order Nos. 137-87 and 92-88. cdtech However, with respect to "proprietary schools" i.e. schools which are organized as stock corporations, there is no reason why said schools should also be exempted from paying taxes since they are operated for profit. While it is true that these "proprietary schools" are helping the government in one of its functions to develop the human resource through education, nevertheless these schools are deriving income and/or profit from their operations. It is therefore just that they share in the support of the services of the government as well as recognized public needs. In view thereof, this Office does not recommend the passage of a law which will exempt "proprietary schools" from the payment of taxes. cd Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue