Tax Exemption of a Non-stock, Non-profit Educational Institution

November 11, 1998 BIR RULING NO. 159-98 232, 237, 238-000-00-159-98 Padilla Law Office 7/F, Padilla-Delos Reyes Bldg. 232 Juan Luna St., Binondo M a n i l a Attention: Atty . Sabino Padilla , Jr . Gentlemen : This refers to your letter dated June 13, 1997 requesting for confirmation of your opinion, on behalf of the Catholic Educational Association of the Philippines (CEAP), that a non-stock, non-profit educational institution, duly recognized or operating with a permit from the Department of Education, Culture and Sports (DECS) or the Commission on Higher Education (CHED), whose income is derived and used actually, directly and exclusively from its educational activities, as clarified in the Department of Finance Order No. 137-87, is exempt from: (a) Keeping books of accounts registered with the BIR under Section 232 of the National Internal Revenue Code; (b) Registration of business name under Section 237 of the Code; and (c) Issuance of receipts and sales invoices printed with the permission of, and stamped by, the BIR, under Section 238 of the Code. In reply, please be informed that under Section 232 of the Tax Code of 1997 (also Section 232 of the Tax Code, as amended), only corporations, companies, partnerships or persons required by law to pay internal revenue taxes, are mandated to maintain and keep BIR-registered books of accounts. Likewise, under Section 236 of the Tax Code of 1997, only persons subject to any internal revenue tax are required to register with the BIR their business names. Furthermore, Sections 237 and 238 both of the same Code, provide that only persons engaged in business and subject to an internal revenue tax are required to issue BIR-registered sales invoices and receipts. In this connection, Sec. 4(3), Article XIV of the 1987 Philippine Constitution provides that "(3) 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. . . ." Thus, since all revenues and assets of the said educational institutions are being used actually, directly and exclusively for educational purposes are exempt from taxes, which includes internal revenue taxes under the National Internal Revenue Code, your opinion that said institutions are exempt from the aforementioned BIR-registration requirements, is hereby confirmed. aisadc It is understood, however, that this ruling applies only insofar as the educational activities of the said non-stock, non-profit educational institutions are concerned This means that, if such educational institution engages in any business activity or transaction on which its Constitutional tax exemption privilege is not applicable (e.g., lease of its real property), the aforesaid BIR-registration requirements must therefore be complied with. Very truly yours, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue