St. Francis Academy of Sta. Teresita, Incorporated

April 13, 2018 BIR RULING NO. 695-18 Par. 3, Sec. 4, Art. XIV of the 1987 Constitution; Sec. 30 (H) of the NIRC of 1997, as amended; RMO No. 44-2016 St. Francis Academy of Sta. Teresita, Incorporated National Highway, Villasta, Teresita, Cagayan 3512 Attention: AAA _______________ Gentlemen : This refers to your letter dated November 09, 2016, applying on behalf of ST. FRANCIS ACADEMY OF STA. TERESITA, INCORPORATED , for tax exemption certificate being enjoyed by non-stock, non-profit educational institution under Section 30 (H) of the National Internal Revenue Code of 1997, as amended. It is represented that ST. FRANCIS ACADEMY OF STA. TERESITA, INCORPORATED with Taxpayer's Identification No. (TIN) 000-000-000-000 and Certificate of Registration No. OCN 4RC0001050945 dated June 25, 2013, is a non-stock, non-profit religious educational institution 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. 51236; that the purpose for which the corporation was incorporated is to give a sound, complete and general secondary education to children and youth in the Philippines and to promote their intellectual and moral development ; and that it was permitted and granted the following Government Recognitions by the Department of Education (DepEd): Government Recognition/ Permit No. Date issued Degree/Program Effective School Year S-055, s. 2015 July 20, 2015 Senior High School Program Academic Track: Humanities and Social Sciences (HUMSS) Strand General Academic (Gas) Strand 2016-2017 09 s. 2004 Oct. 05, 2004 Pre-elementary and Elementary (Grades I-VI) Courses 2004-2005 48 s. 1974 May 31, 1974 Complete Secondary Course (Day) under the 2-2 Plan - 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 an educational institution to be exempt from tax as provided under Revenue Memorandum Order (RMO) No. 44-2016 dated July 25, 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. (Emphasis supplied) Under the above quoted provisions, one of the requirements for an educational institution to be exempt from income tax pursuant to the provisions of paragraph 3, Section 4, Article XIV of the 1987 Constitution, in relation to Section 30 (H) of the National Internal Revenue Code of 1997, as amended, and RMO No. 44-2016, is to be organized as a non-stock, non-profit educational institution. However, in the instant case, the submitted Articles of Incorporation of ST. FRANCIS ACADEMY OF STA. TERESITA, INCORPORATED disclosed that its registration with the SEC is only a non-stock corporation. Consequently, it cannot be qualified as a non-profit educational institution under Section 30 (H) of the National Internal Revenue Code of 1997, as amended. Therefore, it 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 bear in mind that, "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." 1 Please be guided accordingly. Very truly yours, (SGD.) CAESAR R. DULAY Commissioner of Internal Revenue Footnotes 1. Quezon City and The City Treasurer of Quezon City vs. ABS-CBN Broadcasting Corporation , [G.R. No. 166408, 6 October 2008].