BIR Ruling No. 111-12

February 22, 2012 BIR RULING NO. 111-12 Section 27 (D) (1) of the NIRC of 1997; BIR Ruling No. 039-2011 United Coconut Planters Bank P. Ocampo Branch, UG/F Torre Lorenzo Condominium, Taft Ave. cor. Vito Cruz, Malate, Manila Attention: Ms. Gina S. Mercado Branch Manager Assistant Vice President Gentlemen : This refers to your letter dated March 10, 2011 requesting, on behalf of your clients: a) De La Salle University, Inc.; b) De La Salle-Santiago Zobel School, Inc. [Formerly: De La Salle South, Inc.]; c) Hermano (San) Miguel Febres Cordero Medical Education Foundation (De La Salle-Health Sciences Institute), Inc. [Formerly: Hermano (San) Miguel Febres Cordero Medical Education Foundation (De La Salle-Health Sciences Campus), Inc.]; TaISDA d) St. Joseph School-La Salle (Bacolod), Inc. [Formerly: St. Joseph's High School, Inc. (Bacolod City)]; and e) La Sallian Educational Innovators Foundation (De La Salle-College of Saint Benilde), Inc. collectively referred to as "De La Salle non-stock non-profit educational institutions", revalidation of their exemption from 20% and 7-1/2% final taxes on the interest income from their local bank deposits and foreign currency deposits: Documents submitted disclose that the following De La Salle non-stock non-profit educational institutions are clients of UNITED COCONUT PLANTERS BANK, P. Ocampo Branch: 1) De La Salle University, Inc., with TIN 000-755-743-000, is a private non-stock, non-profit educational institution registered with the Securities and Exchange Commission (SEC) under SEC Reg. 65138; that then Department of Education Culture and Sports (DECS) and Commission on Higher Education (CHED) have issued several Government Recognitions to the institution to offer collegiate courses; that it was previously issued BIR Ruling No. 176-88 dated May 4, 1988 exempting the institution from 20% tax on its interest and/or yield on deposit substitute instruments and interest on its savings and time deposits; 2) De La Salle-Santiago Zobel School, Inc. [Formerly: De La Salle South, Inc.] with TIN 002-856-492-000, is a private non-stock, non-profit educational institution registered with the SEC under Registration No. 69997; that it is a recognized private school by DECS under Recognition Nos. P-0005, s. 1982; E. 0004, s. 1984; S-012, s. 1984 as well as Government Recognition Nos. 036, s. 1983 S-001, s. 1985 for Pre-elementary and elementary courses and General Secondary courses respectively; and that it was previously issued BIR Ruling No. 169-88 dated May 3, 1988 exempting the institution from 20% tax on its interest and/or yield on deposit substitute instruments and interest on its savings and time deposits; CTIEac 3) Hermano (San) Miguel Febres Cordero Medical Education Foundation (De La Salle-Health Sciences Institute), Inc. [Formerly: Hermano (San) Miguel Febres Cordero Medical Education Foundation (De La Salle-Health Sciences Campus), Inc.], with TIN 000-289-828-000, is a private non-stock, non-profit educational institution registered with the SEC under Registration No. 140783; that it has been granted by DECS and CHED Government Recognitions to offer health science courses; and that it was previously issued BIR Ruling No. 177-88 dated May 4, 1988 exempting the institution from 20% tax on its interest and/or yield on deposit substitute instruments and interest on its savings and time deposits; 4) St. Joseph School-La Salle (Bacolod), Inc. [Formerly: St. Joseph's High School, Inc. (Bacolod City)], with TIN 261-135-419-000, is a private non-stock, non-profit educational institution registered with the SEC under Registration No. 96798; that it has been granted by then Ministry of Education, Culture and Sports (MECS) Government Recognition to offer secondary education program; and that it was previously issued BIR Ruling No. RR-6B-20 s. 1989 dated November 14, 1989 exempting the institution from 20% withholding tax on its interest and/or yield on deposit substitute instruments and interest on its savings and time deposits; 5) La Sallian Educational Innovators Foundation (De La Salle-College of Saint Benilde), Inc., with TIN 001-399-066-000, is a private non-stock, non-profit educational institution registered with the SEC under Registration No. 144920; that it has been granted by then DECS and CHED several Government Recognitions and Permits to offer various collegiate courses; and that it was previously issued BIR Ruling No. 408-88 dated August 23, 1988 exempting the institution from 20% withholding tax on its interest and/or yield on deposit substitute instruments and interest on its savings and time deposits; and that there is a need to re-validate the BIR Rulings previously issued in relation to their exemption from the 20% and 7-1/2% final taxes imposed on their interest income from local bank deposits and foreign currency deposits. In reply, please be informed that paragraph 3, Section 4, Article XIV of the 1987 Constitution provides, viz.: "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." Likewise, Section 30 (H) of the 1997 Tax Code, as amended, provides, viz.: "Sec. 30. Exemptions from Tax on Corporations. The Following organizations shall not be taxed under this Title in respect to income received by them as such: xxx xxx xxx (H) A non-stock and non-profit educational institution; . . . ." A non-stock, non-profit educational institution is 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. The exemption contemplated herein refers to internal revenue taxes 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. (BIR Ruling No. 039-2011 dated February 9, 2011) DCHaTc Based on the foregoing, this Office is of the opinion that De La Salle non-stock non-profit educational institutions are such institutions contemplated under the aforementioned provisions of the Constitution and the Tax Code of 1997, as amended. Thus, pursuant to Department Order No. 149-95 dated November 24, 1995 amending Department Order No. 137-87, interest income from currency bank deposits and yield from deposit substitute instruments used actually, directly and exclusively in pursuance of its purposes as educational institutions, De La Salle non-stock non-profit educational institutions are exempt from the 20% final tax and 7-1/2% tax on interest income under the expanded foreign currency deposit system imposed under Section 27 (D) (1) of the Tax Code of 1997, subject to their compliance with the conditions that as tax-exempt educational institutions they shall, on an annual basis, submit to the Revenue District Office concerned their respective annual information returns and duly audited financial statements together with the following: (a) Certification from their depository banks as to the amount of interest income earned from passive investment not subject to the 20% final withholding tax and 7-1/2% tax on interest income under the expanded foreign currency deposit system imposed by Section 27 (D) (1) of the Tax Code of 1997; (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 improvement of school buildings and facilities, acquisition of equipment, books and the like) to be funded out of the money deposited in banks or placed in money markets, on or before the 15th day of the fourth month following the end of its taxable year (Sec. 4, Finance Department Order No. 137-87) (BIR Ruling No. 039-2011) . This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered null and void. cHATSI Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue