Manila Tytana Colleges, Inc.

April 13, 2018 BIR RULING NO. 693-18 Par. 3, Sec. 4, Art. XIV of the 1987 Constitution; Sec. 30 (H) of the NIRC of 1997, as amended; RMO No. 44-2016 Manila Tytana Colleges, Inc. Metropolitan Park, Pres. D. Macapagal Blvd., Brgy. 076, Pasay City 1300 Attention: AAA _______________ Gentlemen : This refers to your letter dated October 28, 2015, applying on behalf of MANILA TYTANA COLLEGES, INC. for revalidation of its tax exemption pursuant to Section 30 (H) of the National Internal Revenue Code of 1997, as amended. It is represented that MANILA TYTANA COLLEGES, INC. with BIR Taxpayer's Identification No. (TIN) 000-000-000-000 and Certificate of Registration No. OCN 9RC0000299655 dated November 24, 1993, is a non-stock corporation duly organized and existing under the laws of the Republic of the Philippines; that it is registered with the Securities and Exchange Commission (SEC) under Company Registration No. ANO93-003843; that the primary purpose for which the corporation was incorporated is "to organize, establish, maintain and conduct an institution of learning which will emphasize intellectual, physical, technical, social, cultural and moral character development and to this end, to own and operate schools offering collegiate, tertiary level and/or post-graduate courses following such method of instruction and curricula approved by the proper government authorities and subject to all government laws, rules and regulations" ; 1 and that it was permitted and granted the following Government Recognitions: Recognition Number Degree/Program Date Issued Issued by 098 s. 1981 Bachelor of Science in Nursing August 18, 1981 Ministri ng Edukasyon at Kultura (Ministry of Education and Culture), Maynila 005 s. 1985 Bachelor of Science, Majors in Zoology and Psychology March 18, 1985 Ministri ng Edukasyon, Kultura at Isports, Pambansang Punong Rehiyon, Banawe, Lungsod Quezon 001 s. 2010 Bachelor of Science in Holistic Nutrition with Culinary Arts January 4, 2010 Commission on Higher Education-National Capital Region 043 s. 2011 Bachelor of Science in Hotel and Restaurant Management April 12, 2011 Commission on Higher Education-National Capital Region 019 s. 2012 Bachelor of Science in Information Technology March 13, 2012 Commission on Higher Education-National Capital Region 012 s. 2013 Bachelor of Science in Entrepreneurship March 15, 2013 Commission on Higher Education-National Capital Region 013 s. 2013 Bachelor of Science in Business Administration, Major in Human Resource Development Management, Operations Management, Financial Management, Marketing Management and Business Economics March 19, 2013 Commission on Higher Education-National Capital Region In reply, please be informed that paragraph 3, Section 4, Article XIV of the 1987 Constitution states that: "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." (Emphasis supplied) Likewise, Section 30 (H) of the National Internal Revenue Code of 1997, as amended, provides, viz. : "Sec. 30. Exemptions from Tax on Corporations. The following organizations shall not be taxed under this Title in respect to income received by them as such: xxx xxx xxx (H) A non-stock and non-profit educational institution; x x x" (Emphasis supplied) Moreover, there are two requisites in order for a non-stock, non-profit educational institution to be exempt from tax as provided under Revenue Memorandum Order (RMO) No. 44-2016; to wit: a) It is a non-stock, non-profit educational institution; and b) Its revenues are actually, directly and exclusively used for educational purposes. "Non-stock" means " no part of its income is distributable as dividends to its members, trustees, or officers " and that any profit " obtained as an incident to its operations shall, whenever necessary or proper, be used for the furtherance of the purpose or purposes for which the corporation was organized. " 2 "Non-profit" means that " no net income or asset accrues to or benefits any member or specific person, with all the net income or asset devoted to the institution's purposes and all its activities conducted not for profit. " 3 In the submitted certification under oath by the __________ 4 of MANILA TYTANA COLLEGES, INC. , it was disclosed that for School Year 2012-2013, a total of _______________ Pesos (Php__________) were paid to its trustees, advisers and officers in the form of per diem and transportation allowances. The giving of per diem and transportation allowances to the members of the Board of Trustees is considered a distribution of the equity (including the net income) of MANILA TYTANA COLLEGES, INC. This is a form of private inurement which the law prohibits in the organization and operation of a non-stock, non-profit corporation. This act is not in accordance with the definition of "non-profit" that "no net income or asset accrues to or benefits any member or specific person, with all the net income or asset devoted to the institution's purposes and all its activities conducted not for profit." Thus, MANILA TYTANA COLLEGES, INC. cannot be qualified as a non-profit educational institution under Section 30 (H) of the National Internal Revenue Code of 1997, as amended. Please bear in mind that, " being a non-stock and/or non-profit corporation does not, by this reason alone, completely exempt an institution from tax. " 5 Thus, " statutes granting tax exemptions are construed strictissimi juris against the taxpayer and liberally in favor of the taxing authority. A claim of tax exemption must be clearly shown and based on language in law too plain to be mistaken. Otherwise stated, taxation is the rule, exemption is the exception. The burden of proof rests upon the party claiming the exemption to prove that it is in fact covered by the exemption so claimed. " 6 In view of the foregoing, the request of MANILA TYTANA COLLEGES, INC. to be exempted from income tax on its income as a Section 30 (H) institution is hereby denied as it failed to prove that it is a non-profit educational institution. Therefore, MANILA TYTANA COLLEGES, INC. shall be treated as a proprietary educational institution subject to ten percent (10%) preferential rate pursuant to Section 27 (B) of the National Internal Revenue Code of 1997, as amended. Please be guided accordingly. Very truly yours, (SGD.) CAESAR R. DULAY Commissioner of Internal Revenue Footnotes 1. Second Article, Latest Amended Articles of Incorporation. 2. Section 87, Corporation Code. 3. CIR vs. St. Luke's Medical Center, Inc. , G.R. Nos. 195909 and 195960 dated 26 September 2012. 4. AAA. 5. CIR vs. St. Luke's Medical Center, Inc. [G.R. No. 195909 & G.R. No. 195960, 26 September 2012]. 6. Quezon City and The City Treasurer of Quezon City vs. ABS-CBN Broadcasting Corporation [G.R. No. 166408, 6 October 2008].