BIR Ruling [DA-272-98]

June 26, 1998 BIR RULING [DA-272-98] Sister Maria Carmela Brescia Foundation, Inc. Marytown Circle, Greenfields I Subdivision Novaliches, Quezon City Attention: Sr . Ruby Rita M . Linsangan, FIS Corporate Secretary Gentlemen : This refers to your letter dated June 25, 1998 requesting for exemption from the twenty percent (20%) final withholding tax on interest income from Philippine currency bank deposits and yield from deposit substitute instruments used actually, directly and exclusively for educational purposes, pursuant to Section 4(3), Article XIV of the 1987 Philippine Constitution. LLphil In reply, please be informed that Section 2 of Finance Department Order No. 149-95 dated November 4, 1995, amending Finance Department Order No. 137-87 pertinent portion of which reads: "SEC. 2. Coverage of Exemption under Section 4(3) Article XIV of the New Constitution The exemption herein contemplated refers to internal revenue taxes and customs duties, in appropriate cases, imposed by the national government on all revenues and assets of non-stock, non-profit educational institutions used actually, directly and exclusively for educational purposes. Non-stock, non-profit educational institutions are exempt from tax on all revenues derived in pursuance of its purpose as an educational institution and used actually, directly, and exclusively for educational purposes. . ." Such being the case, Sister Maria Carmela Brescia Foundation, Inc., a non-stock, non-profit educational institution is exempt from the 20% final withholding tax imposed under Section 24(e)(1) of the Tax Code, as amended [now Section 27(D)(1) of the Tax Code of 1997] subject to the 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 statements together with the following: (a) Certification from its depository banks as to the amount of interest income earned from passive investments not subject to the 20% final tax imposed under Section 24(e) of the Tax Code, as amended [now Section 27(D)(1) of the Tax Code of 1997]; prcd (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 improvements of school buildings and facilities, acquisition of equipment, books and the like) to be funded out of money deposited in banks or placed in money markets. (BIR Ruling No. ENPS004-96 dated February 7, 1996) 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. llcd Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)