Ruling on the Tax Status of a Non-stock, Non-profit Educational Institution

September 22, 1987 BIR RULING NO. 299-87 170 051-87 299-87 S i r : This refers to your letters dated May 18, 1987 and July 9, 1987, stating that your client, Interface Computer Learning Center, Inc., is a non-stock, non-profit educational institution which offers short term courses on electronic data processing; and that on May 3, 1982 it was registered with the Bureau of Domestic Trade as a single proprietorship. Documentary evidence submitted further shows that on June 4, 1986 your client was incorporated and duly registered as such with the Securities and Exchange Commission; and that it was accorded Government recognition, effective school year 1985-1986 for basic computer concept course, Report Program Generator In Course, Basic Language Course and Common Business Oriented Language Course pursuant to Act No. 2706, as amended, and Batas Pambansa Blg. 232. You also orally represented that the students are charged fees for any of the aforementioned courses. Based on the foregoing, you now request opinion on the following: a. As to whether or not your client is a contractor; b. As to whether or not it is required to register with this Bureau its books of accounts having already registered the same with the Securities and Exchange Commission (SEC); c. As to whether or not it is subject to the fixed annual tax, residence tax, mayor's permit and municipal licenses; d. As to whether or not it is exempt from (1) withholding tax on its savings and time deposits, and (2) value-added tax or subsequent sales tax on its purchases of goods from other firms; and e. As to whether or not payments of compensation to its officers are allowed. In reply, I have the honor to inform you as follows: a. As an educational institution and duly recognized by the Department of Education, Culture and Sports as such, your client is not a contractor and is therefore, not subject to the contractor's tax imposed by Section 170 of the Tax Code. This is so because the theory of the contractor's tax is that it is a tax on the sale of labor or services. (BIR Ruling No. 051-87). b. Notwithstanding previous registration of your books of accounts with the Securities and Exchange Commission in compliance with the requirements of said Office, you are still required, for purposes of taxation, to register the same books with this Bureau pursuant to Section 19 of Revenue Regulations No. V-1, as amended. c. As to whether or not your client is subject to the residence tax, mayor's permit and municipal licenses, it is suggested that you direct your inquiry to the Municipal or City Mayor having jurisdiction over your client. d. (1) Interest earnings on its savings and time deposits are subject to the 20% final withholding tax pursuant to Section 24(e) of the Tax Code, as amended by P.D. No. 1994; and (2) the subsequent sales tax on purchases of goods from other firms shall be paid by the seller pursuant to Section 164 of the same Code, as amended by Executive Order No. 36. Pursuant to Section 100 of the Tax Code as amended by E.O. No. 273, effective January 1, 1988, there shall be levied, assessed and collected on every sale, barter or exchange of goods, a value-added tax equivalent to 10% of the gross selling price or gross value in money of the goods sold, bartered or exchanged, such tax to be paid by the seller or transferor . e. As to whether or not your client is allowed to pay compensation to its officers, is a matter incidental to employer-employee relationship between it and the latter. Very truly yours, (SGD.) EUFRACIO D. SANTOS Deputy Commissioner (Officer-In-Charge)