Tax Exemption Granted to Notre Dame of Greater Manila, Inc.

October 4, 1988 BIR RULING NO. 482-88 24 176-88 482-88 Gentlemen : This refers to your letters dated January 21 and February 4, 1988 requesting a certificate of tax exemption in your favor pursuant to Section 4(3), Article XIV of the 1987 Constitution on the following: cdtech 1. interest income from bank deposits and fund replacements; 2. income derived from auxiliary services namely bookstores and canteens; 3. taxes on importation of books and other educational materials and equipment; and 4. others beneficial to a non-stock, non-profit educational institution. 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 privileges 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 purpose 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 purposes or function. (Sec. 2, Finance Department Order No. 137-87) Such being the case, the Notre Dame of Greater Manila, 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; customs duties and value-added tax on its importation of books and other educational material and equipment to be actually, directly and exclusively used for educational purposes. Moreover, revenues derived from and assets used in the operation of cafeterias/canteen, dormitories and bookstores 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 you but operated by a concessionaire. Finally, the income from miscellaneous school related operations like car stickers are likewise exempt from income tax imposed under the Tax Code, as amended. It is however, understood that the Notre Dame of Greater Manila, 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