University of the Philippines Manila

May 16, 2007 BIR RULING [DA-301-07] BIR Ruling No. 046-2007; Sec 30 (i), NIRC; Sec 1, Rule VI, IRR of RA 8503; Sec. 54, RA 9241 University of the Philippines Manila 8/F Central Block, Philippine General Hospital Taft Avenue, Manila Attention: Ramon L. Arcadio Professor and Chancellor Gentlemen : This refers to your letter dated April 13, 2007, requesting for a ruling as to whether or not the UP Manila-National Institutes of Health (UPM-NIH) is subject to withholding taxes on its income from the conduct of PhilHealth validation studies. It is represented that the National Institutes of Health was created and established at the University of the Philippines, Manila through the Health Research and Development Act, Republic Act (RA) No. 8503, on February 13, 1998. Section 1, Rule VI of the Implementing Rules and Regulations (IRR) of RA 8503, as approved by the UP Board of Regents on June 25, 1998, explicitly states: "The NIH shall be a unit of the University of the Philippines Manila under the administrative supervision of the UP Manila Chancellor and subject to the rules and regulations of the University of the Philippines as promulgated by the UP Board of Regents." It is further represented that UPM-NIH intends to conduct studies to validate PhilHealth accomplishments, as mandated by Section 54 of RA 9241. Said studies will be funded by PhilHealth in accordance with the same provision. You now request this Office to confirm your opinion that UPM-NIH is exempt from withholding taxes as a government educational institution on its income derived from the conduct of the above studies pursuant to Section 54 of RA 9241. In reply, please be informed that Section 30 (i) of the Tax Code of 1997, as amended by RA 9337, provides that: "Sec. 30. Exemptions from tax on Corporations . The following organizations shall not be taxed under this Title in respect to income derived by them as such: xxx xxx xxx (I) Government educational institution;" xxx xxx xxx In relation thereto, paragraph 3, Section 4, Article XIV of the 1987 Philippine Constitution states: "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." It is evident from the above provisions of law that government educational institutions are exempt from tax on their income used actually, directly and exclusively for educational purposes. This includes UP, which, in an earlier ruling by this Office, (DA-046-2000, dated September 26, 2000) was regarded to be a non-stock, non-profit government educational institution falling squarely within the purview of the above constitutional provision. As such, it is deemed qualified to avail of the tax exemption granted by such provision with respect to its revenues derived in pursuance of its educational purpose where such revenues are actually, directly and exclusively used therefor. In this regard, UPM-NIH is clearly part of the UP System, pursuant to Section 1, Rule VI of the IRR of RA 8503 which states that: "Section 1. The NIH shall be a unit of the University of the Philippines Manila under the administrative supervision of the UP Manila Chancellor and subject to the rules and regulations of the University of the Philippines as promulgated by the UP Board of Regents." IHaECA Moreover, the PhilHealth validation studies UPM-NIH intends to conduct are undisputably in furtherance of its educational purpose, in accordance with the mandate imposed on it under Sec 54 of RA 9421, to wit: "Sec. 54 xxx xxx xxx The National Economic and Development Authority, in coordination with the National Statistics Office and the National Institutes of Health of the University of the Philippines shall undertake studies to validate the accomplishments of the Program. The budget required to undertake such study shall come from the income of PhilHealth." Accordingly, this Office is of the opinion that since UPM-NIH is part of a government educational institution, and will derive income from PhilHealth to finance the conduct of studies for educational purposes, such income is exempt from income tax, and consequently, from withholding tax, pursuant to Sec 30(i) of the same Tax Code. 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