10% Tax on Income of UST as a Private Educational Institution

November 14, 1988 BIR RULING NO. 539-88 24 169-88 539-88 Gentlemen : This refers to your letter dated March 2, 1988 requesting exemption from the 10% tax on your income as a private educational institution prescribed under Section 24(a) of the Tax Code, as amended by Executive Order No. 37; the 20% tax on your interest and/or yield on deposit substitute instruments and interest on your savings and time deposits; the customs duties and the compensating tax on your importation of books and other educational materials and equipment to be actually, directly and exclusively used for your educational purposes. In reply thereto, I have the honor to inform you that par. 3, Sec. 4, Art. 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. Such being the case, the University of Santo Tomas 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 and other educational materials and equipment to be actually, directly and exclusively used for educational purposes. It is hereby understood that the tax exemption granted herein under the above-quoted constitutional provision does not include the income derived from the operations of the UST Hospital which is owned by you. Said hospital is still subject to internal revenue tax in the absence of a showing that the same is entitled to tax exemption. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner