BIR Ruling [DA-445-00]

December 29, 2000 BIR RULING [DA-445-00] 32 296-93 Asian Theological Seminary 54 Scout Madrinan Quezon City Attention: Dr . Isabelo F . Magalit President Gentlemen : This refers to your letter dated March 20, 2000 stating that Asian Theological Seminary, Inc. (ATS) is a non-stock, non-profit religious corporation duly registered with the Securities and Exchange Commission (SEC) on September 16, 1976 under SEC Reg. No. 69651; that it is engaged in theological education and is a member of the Philippine Council of Evangelical Churches; that ATS faculty trains pastors and missionaries for the evangelical churches; that the aforesaid faculty renders full time service to religious educational institution, as much as the pastors of local churches; that regular compensation are received by the members of the faculty; that in the past ATS also acted on the government's behalf as withholding tax agent; that while ATS promised to pay its workers regular compensation, ATS' income from student fees account for only twenty four to twenty six percent (24-26%) of the seminary's cost of operation; that the remaining amount for the seminary's sustenance has to come from gifts, donations and offerings from churches, individuals and other sources; and that you now request for the exemption from the payment of income tax of your workers (faculty and staff) compensation. In reply thereto, please be informed that the above request cannot be granted for lack of legal basis. The salaries of your religious workers, such as your faculty and staff who are rendering their regular services in the seminary are considered compensation income which is subject to withholding tax. Every form of compensation for personal services is taxable, regardless of how it is earned, by whom it is paid, the label by which it is designated, the basis upon which it is determined, or the form to which it is received. (Michie, Federal Tax Handbook, p. 112) Needless to state, tax exemptions are strictly construed and that the exemption will not be held to be conferred unless the terms under which it is granted clearly and distinctly show that such was the intention of the parties. (Phil. Acetylene Co., Inc. vs. Commissioner, 20 SCRA 1056; Surigao Consolidated Mining Co. vs. Collector, L-14878, December 26, 1963) Exemptions from taxation are highly disfavored in law and he who claims an exemption must be able to justify his claim by the clearest grant of organic or statute law. An exemption from the common burden cannot be permitted to exist upon vague implications. (Asiatic Petroleum Co. vs. Llamas, 49 Phil. 466; Davao Light and Power Co., Inc. vs. Comm. Of Customs, L-28731, 28902, March 29, 1972) 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. TcDIEH Very truly yours, Commissioner of Internal Revenue By: (SGD.) LILIAN B. HEFTI Deputy Commissioner Legal and Inspection Group