Exemption Granted to Benedictine Abbey School (San Beda, Alabang), Inc.

May 3, 1988 BIR RULING NO. 173-88 24 002-88 173-88 Gentlemen : This refers to your letter dated April 6, 1988 requesting a certificate of tax exemption in your favor pursuant to Section 4(5), Article XIV of the 1987 Constitution and a clarification of the nature, scope, and extent of the tax exemption on the following: cdti "1. School operation, the income from which consist of tuition, matriculation and other similar fees; "2. Income from bank deposit interest and money market placement incident to school operation; "3. Income from canteen owned by the school but operated by a concessionaire; "4. Bookstore inside the school campus. Aside from revenue, does tax exemption thereunder include exemption from value-added tax (VAT) on sale of books, school supplies, uniforms, and other school related items? and "5. Income from miscellaneous school related operations like car stickers, etc., are they also exempt? It is represented that you are operated by the Benedictine fathers belonging to the Order of St. Benedict; that you are non-stock, non-profit educational institution, operated exclusively for educational purposes, no part of the income of which inure to the benefit of any private stockholder or individual; and that your income from operations are actually, directly and exclusively used for educational purposes. In reply, I have the honor to inform you that paragraph 3, Section 4, Article XIV of the 1987 constitution provides, viz: "(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 . . ." The aforementioned Constitution was ratified at a plebiscite held for the purpose on February 2, 1987. Accordingly, the tax exemption privilege of non-stock, non-profit educational institutions took effect as of said date. Non-stock, non-profit educational institutions are exempt from tax on all revenues derived in pursuance of its purposes as an educational institution and used actually, directly, and exclusively for educational purposes. The exemption herein contemplated refers to internal revenue taxes and customs duties, in appropriate cases, 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 . They shall, however, be subject to internal revenue taxes on income from trade, business or other activity the conduct of which is not related to the exercise or performance by such educational institution of its educational purpose or function. (Sec. 2, Finance Department Order No. 137-87) cdta Such being the case, the Benedictine Abbey School (San Beda, Alabang), Inc. being a non-stock, non-profit educational institution is exempt from taxes e.g., 10% tax on its income as educational institution consisting of tuition, matriculation and other similar fees; 20% withholding tax on its interest income and/or yield on deposit substitute instruments and interest on its savings and time deposits; and 10% value-added tax on its sale of books (see also Sec. 103(f), Tax Code as amended by E.O. 273), school supplies, uniforms, and other school related items to be actually, directly and exclusively used for educational purposes. Moreover, revenues derived from and assets used in the operations of cafeterias/canteens, dormitories, and bookstores are exempt from taxation provided they are owned and operated by the educational institution as ancillary activities and the same are located within the school premises . (Department Order No. 137-87 supra ). Accordingly, the tax exemption does not include canteen owned by you but operated by a concessionaire. Finally, the income from miscellaneous school-related operations like car stickers are likewise exempt from income tax imposed under the Tax Code, as amended. It is however, understood that the Benedictine Abbey School (San Beda Alabang), Inc. shall be subject to internal revenue taxes on its income from trade, business or other activity the conduct of which is not related to the exercise or performance by such educational institution of its educational purposes or function. cd Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner