Request for Tax Exemption of Printing Machines, Equipment and Accessories Received from the Belgian Government

September 17, 1986 BIR RULING NO. 175-86 169 000-00 175-86 Gentlemen : This refers to your letter dated April 28, 1986 requesting exemption from compensating tax of the printing machines, equipment and accessories received by you from the Belgian government through the sponsorship of the COMIDE-DMOS of Bruxelles, Belgium and your other letter received in this Office on April 30, 1986 requesting exemption not only from the compensating tax but also from any and all taxes, import duties, assessment and other charges, provided under Republic Act. No. 6055. It is represented that the said printing equipment shall be used exclusively for educational purposes for the Printing Technology course of your school; that the shipment which arrived on April 6, 1986, is covered by Bill of Lading No. 563-311107 of NYK Line; that the Angeles University Foundation (AUF) is a non-stock, non-profit education institution incorporated under R.A. No. 6055 (otherwise known as the Foundation Law), and the pursuant to Section 8 of R.A. No. 6055, AUF is "exempt from the payment of all taxes, import duties, assessments and other charges on all income derived from or property, real or personal, used exclusively for the educational activities of the foundation." In reply, please be informed that your requests for exemption cannot be granted. It is noted that your exemption as an education foundation under Republic Act No. 6055 has been withdrawn by P.D. No. 1955 effective October 15, 1984. Moreover, Section 169 (formerly Section 204) of the Tax Code as amended enumerates the articles which are not subject to compensating tax and those imported and/or received from abroad by educational foundations, like the AUF are not included in the enumeration. Accordingly, the shipment to you of the printing machines, equipment and accessories is subject to the 20% compensating tax imposed under Section 169 in relation to Section 165(A)(2) [now Section 163(4)] of the Tax Code. Moreover, our ruling of July 1, 1980 to the effect that, pursuant to Republic Act No. 6055, you are exempt from income tax and the filing of the corresponding income tax return is hereby revoked effective October 15, 1984. Accordingly, beginning October 15, 1984, you are subject to income tax at the preferential rate of 10% of your taxable net income, pursuant to Section 24(a) of the Tax Code, prior to its amendment by Executive Order No. 37. Thereafter, pursuant to Section 24(b) of the Tax Code as amended by Executive Order No. 38 beginning with calendar year 1986, you are subject to a tax of 10% on your taxable income except those covered by paragraph (e) thereof, provided that if your gross income from unrelated trade, business or other activity exceeds 50% of your total gross income derived from all sources, a tax of 35% shall be imposed on your entire taxable income. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner