Castelo Law Office

July 13, 2007 BIR RULING [DA-383-07] VAT; D.O. 137-87; DA-234-2004 Castelo Law Office 4/F Rgc Bldg., 219 Apo Street Mandaluyong City Attention: Atty. Eduardo G. Castelo Gentlemen : This refers to your letter dated July 10, 2007 requesting in effect an exemption from the payment of value-added tax (VAT) and customs duties on the importation of educational materials and equipment by your client, the Technological Institute of the Philippines, Inc. It is represented that the Technological Institute of the Philippines, Inc. (TIP for brevity) is a corporation duly organized and existing under and by virtue of Philippine laws, with specific purpose of establishing and operating an educational institution; that TIP is recognized and accredited by the Commission On Higher Education (CHED) and the Department of Education, Culture and Sports (DECS); that it is established and engaged specifically for educational purposes, offering collegiate as well as technical and vocational courses; that all its land, buildings, facilities, equipment and other assets are actually, directly and exclusively used for its educational purposes; that an essential part of TIP's facilities is its basketball court facilities and equipment, which are exclusively used by its students and faculty for physical education classes, sports activities, inter-school meets and competitions, assemblies, drills, school programs, and other educational purposes; that TIP is presently putting up and improving its basketball and sports facilities in its school premises at 363 Casal St., Quiapo, Manila, by importing a pair of Porter Basketball Board and Goal Set, Robbins Mapple Wood Flooring Set, and LED Scoreboard Set; that said importation is covered by their Pro-forma Invoices issued by their respective suppliers, Porter Athletic, Inc., Robbins International, Inc., and Trans-Lux Fair Play; that the subject basketball materials and equipment are to be actually, directly and exclusively used for educational purposes, they are to form part of the school basketball and sports facilities, which are essential in the performance and accomplishment of TIP's educational purposes. In reply, please be informed that in BIR Ruling No. DA-234-2004 dated May 7, 2004, this Bureau had the occasioned to rule that importation of books, films, slides and other educational materials and equipment such as computers to be actually, directly and exclusively used for educational purposes shall be exempt from the value-added tax and customs duties, provided the guidelines provided under Department Order No. 137-87 in addition to the usual import requirements are observed. (Citing BIR Ruling No. 248-88 dated June 6, 1988 and BIR Ruling No. 130-90 dated July 4, 1990). As cited in the above ruling, the test of exemption from taxation is the use of the property for purposes mentioned in the Constitution [Apostolic Perfect vs. City Treasurer of Baguio , 71 Phil., 547 (1941)]. Thus, Art. VI, Sec. 28, par. 3 of the 1987 Constitution provides as follows: "(3) . . . and all lands, buildings, and improvements, actually, directly, and exclusively used for religious, charitable or educational purposes shall be exempt from taxation." In the case of Abra Valley College, Inc. vs. Aquino , L-39086, June 15, 1988, the Supreme Court interpreted the phrase "exclusively used for educational purposes" to extend to "facilities which are incidental to and reasonably necessary for the accomplishment of the main purposes". From the foregoing, and since in the instant case TIP is importing basketball materials and equipment which are to be actually, directly and exclusively used for educational purposes, as these materials and equipment will form part of the school basketball and sports facilities, thereby essential in the performance and accomplishment of its educational purposes, this Office therefore rules that the said importation is exempt from the value-added tax and customs duties, provided the guidelines provided under Department Order No. 137-87 in addition to the usual import requirements are observed. 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. aITECD Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service