Rogationist College — Parañaque

August 26, 2009 BIR RULING [DA-(DT-042) 480-09] VAT Ruling No. 017-02 & 031-03, BIR Ruling No. 248-88, DA-40-02, S-30-096-99 & S30-27-2003 Rogationist College Paraaque Eriberta Lane, Don Jose Green Court Sucat, Paraaque Attention: Fr. Enrique T. Raveza III, RCJ Rector-President Gentlemen : This refers to your letter dated June 29, 2009 requesting for cancellation of "percentage tax" in your Certificate of Registration (BIR Form 2303) and exemption from donor's tax on donations in favor of Rogationist College Paraaque. Documents show that Rogationist College Paraaque, with Taxpayer Identification No. 006-810-928, is a non-stock, non-profit educational institution registered with the Securities and Exchange Commission (SEC) under SEC Registration No. CN200712167 issued on August 2, 2007. The primary purpose for which it was organized is "(t)o offer pre-elementary, elementary, secondary and collegiate courses for the religious, moral, academic, technical, industrial and vocational education of students; to train the youth in the scholastic and ecclesiastical field of knowledge in accordance with up-to-date and modern educational theories and methods." It is granted an authority by the Department of Education to operate Nursery/Kindergarten Course under Government Permit (NCR) No. P-106, Series 2008 issued on September 25, 2008 Complete Elementary Course under Government Permit (NCR) No. E-154, Series 2008 issued on September 25, 2008. DTAcIa On Request for Cancellation of Existing Percentage Tax Registration. The phrase "in the course of trade or business" means the regular conduct or pursuit of a commercial or an economic activity, including transactions incidental thereto, by any person regardless of whether or not the person engaged therein is a non-stock, non-profit private organization (irrespective of the disposition of its net income and whether or not it sells exclusively to members or their guests), or government entity. Both the 12% VAT and the 3% percentage tax are taxes on the business transaction or activity. Accordingly, if Rogationist College Paraaque is not engaged in the sale of goods or services in the course of a business pursuit, including transactions incidental thereto, it is not liable for either VAT or percentage tax. Hence, it is not required to file VAT or percentage tax returns. It appears that Rogationist College Paraaque's gross receipts from its operations as a non-stock, non-profit educational institution are exempt from the 12% VAT pursuant to Section 109 (H) of the Tax Code of 1997 as amended by Republic Act No. 9337. However, the VAT exemption provided under Section 109 (H) only pertains to the educational services rendered by private educational institutions but does not include their purchases of goods and services. Thus, while the school is exempt from VAT, it cannot invoke the same exemption privilege to avoid paying VAT on its purchase of goods and/or services even if intended for school operational use because its exemption covers only taxes for which it is directly liable, as a seller of educational service. It does not cover VAT, which is an indirect tax on its purchases of goods and services from VAT-registered suppliers. Thus, VAT for the supply of goods and services may be shifted or passed on to the school by its VAT-registered suppliers. Once shifted, the VAT will form part of the cost of the goods and/or services supplied to the school. (VAT Ruling No. 017-02 dated March 20, 2002 and VAT Ruling No. 031-03 dated June 24, 2003). Moreover, the above exemption does not extend to the school's other activities involving its sale of goods and services which are subject to VAT or percentage tax, as the case may be, imposed under Section 106 of the Tax Code. Section 116 of the Tax Code of 1997 subjects to the 3% percentage tax "any person whose sales or receipts are exempt under Section 109 (z) [now Section 109 (V)] of this Code from the payment of value-added tax and who is not a VAT-registered person . . .". The 12% VAT or the 3% percentage tax, whichever is applicable, is a tax on the business transaction or activity and is an indirect tax which the seller may pass-on or shift to the customer who ultimately bears or assumes the burden of the tax. Accordingly, the school's sale of goods or services which is not directly related to or necessary in the performance of educational services is subject to either the 12% VAT or 3% percentage tax if such gross sales or receipts from sale of goods and services does not exceed P1,500,000.00, which tax payment may legitimately be passed on to its customers i.e., students (BIR Ruling No. 248-88 dated June 6, 1988, BIR Ruling No. DA-40-02 dated March 7, 2002 and BIR Ruling No. S30-27-2003 dated November 21, 2003). TcDHSI If Rogationist College Paraaque is not engaged in the regular conduct or pursuit of a commercial or economic activity, including transactions incidental thereto, it is not subject to VAT or percentage tax, and therefore, may cancel its existing Percentage Tax registration anytime. On Request for Exemption from Payment of Donor's Tax on Behalf of Donors. On the other hand, donation to educational institutions is exempt from the payment of donor's tax pursuant to Section 101 (A) (3) of the Tax Code of 1997, as amended subject to the condition that not more than thirty percent (30%) of said gift shall be used by the donee for administration purposes. However, this Office does not issue general exemption. A ruling is issued on a per transaction and case to case basis. A taxpayer applying for tax exemption has to submit supporting documents i.e., Deed of Donation, Transfer Certificate of Title, and Tax Declaration together with his/its letter-request in order for this Office to assess the transaction before it can issue a ruling granting tax exemption. Please be guided accordingly. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service