Tax Exemption Granted to ADMU-QC

July 13, 1988 BIR RULING NO. 324-88 102-a 000-00 224-88 Gentlemen : This refers to your letter dated March 18, 1988 requesting exemption from: 10% income tax on your income as a private educational institution; 20% final tax on interest and/or yield on deposit substitute instruments and interest on your savings and time deposits; 10% tax on dividends and 1/4 of 1% tax on gains from investment in stocks and customs duties on importation of books and other educational materials and equipment to be actually, directly and exclusively used for educational purposes. It is represented that you are a non-stock, non-profit educational institution; that your income consisting of dividends and gains from sale of investments in stocks are actually earnings of funds managed by your investments managers who under the terms of an investment agreement, are allowed to invest said funds in fixed income placements or in equity investment; that these invested funds are amounts donated to you for building replacement or other educational activities; that these donated funds and earnings of said funds shall be used only for scholarship, research or professional chair awards; 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 taxes 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) Such being the case, the Ateneo de Manila University (Quezon City), 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; 10% value-added tax on its importation of books (see also Sec. 103(f), Tax Code as amended by E.O. No. 273), school supplies, educational materials and equipment to be actually, directly and exclusively used for its educational purposes; 10% tax on dividends (see also E.O. No. 37 effective August 1, 1986) and 1/4 of 1% tax on gains from such investment activity as in stocks, the same being still related to the exercise or performance by the University of its educational purposes or function. It is however, understood that the Ateneo de Manila University (Quezon City), Inc. shall be subject to internal revenue taxes on its income from trade, business and other activity the conduct of which is not related to the exercise or performance by such educational purposes or function. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner