Tax Exemption Granted to Colegio San Agustin, Biñan, Inc.

October 3, 1988 BIR RULING NO. 471-88 24 173-88 471-88 Gentlemen : This refers to your letters dated October 22, 1987 and July 15, 1988 requesting exemption of the Colegio San Agustin, Bian, Incorporated from the 10% tax on its income as a private educational institution prescribed under Section 24(b) of the Tax Code, as amended by Executive Order No. 37; the 20% tax on its interest and/or yield on deposit substitute instruments and interest on its savings and time deposits; the value-added tax on its importation of books and other educational materials and equipment to be actually, directly and exclusively used for educational purposes; and the tax from its operation of canteens and bookstore. It is represented that the Colegio San Agustin, Bian, Inc. is a non-stock, non-profit educational institution, operated exclusively for educational purposes, no part of the income of which inures to the benefit of any private stockholder or individual; and that its 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: "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 institutions of its educational purpose or function. (Sec. 2, Finance Department Order No. 137-87) Such being the case, the Colegio San Agustin, Bian, Inc. being a non-stock, non-profit educational institution is exempt from taxes e.g., 10% tax on its income as an educational institution; 20% withholding tax on its interest income and/or yield on deposit substitute instruments and interest on its savings and time deposits; customs duties and value-added tax on its importation of books (see also Sec. 103(f), Tax Code as amended by E.O. No. 273), school supplies and other educational materials and equipment to be actually, directly and exclusively used for educational purposes. Moreover, revenues derived from the assets used in the operations of canteens and bookstore 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 the school but operated by a concessionaire. Finally, the income from miscellaneous school-related operations are likewise exempt from income tax imposed under the Tax Code, as amended. It is however, understood that the Colegio San Agustin, Bian, 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. Very truly yours, (SGD.) EUFRACIO D. SANTOS Deputy Commissioner