Exemption Granted to Immaculate Conception Academy

August 16, 1988 BIR RULING NO. 392-88 24 247-88 392-88 Gentlemen : This refers to your letter dated May 30, 1988 requesting exemption from the 20% tax on your interest and/or yield on deposit substitute instruments and interest on your savings and time deposits to be actually, directly and exclusively used for your educational purposes; and the type of investment or placements that are exempt from withholding tax. In reply thereto, 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 institution took effect as of said date. Such being the case, the Immaculate Conception Academy being a non-stock, non-profit educational institution is exempt from the 20% withholding tax on its interest income and/or yield on deposit substitute instruments and interest on it savings and time deposits to be actually, directly and exclusively used for educational purposes. However, non-stock, and non-profit educational institutions are "subject to internal revenue taxes on income from trade, business or other activity they conduct of which is not related to the exercise or performance by such educational institution of its educational purpose or function." (Sec. 0.1, Department Order No. 13-89). Your activities as financial outlets of financial institutions, e.g. direct promissory notes of financial institutions such as banks, financing companies and investment houses, trust funds of banks, trust and investment division, outright sale of Central Bank Bills and Treasury Bills and sale of receivables of financial institutions, are not related to the exercise or performance by you as an educational institution of your educational purpose or function. Accordingly, the income derived from said activities are not exempt from taxes. cdt Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner