Jose & Demetria Cojuangco Foundation, Inc.

March 3, 2009 BIR RULING [NSNP-(S30E-022) 172-09] Section 30 (E) Jose & Demetria Cojuangco Foundation, Inc. Luisita Business Park, San Miguel Tarlac City Attention: Noel H. Mallari Acting Center Director Gentlemen : This refers to your letter dated May 5, 2008 requesting exemption from taxes pursuant to Section 30 of the Tax Code of 1997, as amended, in connection with Section 4, Article XIV of the 1987 Constitution. Documents submitted disclosed that Jose & Demetria Cojuangco Foundation, Inc. Tarlac Training Center (Cojuangco Foundation, for short), with TIN: 004-847-085-000, is a non-stock, non-profit institution registered with the Securities and Exchange Commission on May 20, 1996 with SEC Reg. No. ANO96-01799; that its primary purposes for which it was organized among others are the following: "To perpetuate the memories of the late Spouses Jose Cojuangco, Sr. and Demetria Sumulong in grateful public recognition of their entrepreneurial visions that led to the formation of agro-industrial businesses now under the flagship of Jose Cojuangco & Sons Organizations, and to this end "(a) Establish and maintain a memorial hall which will house exhibits of their personal collections and other objects of historical, cultural and educational value; "(b) Establish a system of annual scholarship awards to students who have demonstrated interest and extraordinary ability along the fields of the late spouses and conduct research along the discipline in which said spouses showed keen interest such as in the field of agriculture, engineering and other services; "(c) Sponsor training programs that will strengthen organization of the poor and help them to build a democratic social infrastructure; xxx xxx xxx "(g) Establish and operate a Technical Vocational Training Center which can offer various course that will equip the trainees with skills necessary for employment. (As amended by the members on September 26, 2003) xxx xxx xxx." that it is duly recognized on August 31, 2006 by the Technical Education and Training * Skills Development Authority (TESDA)-Region III, with DTS Accreditation No. 03-007-2006 for Automotive Wiring Harness Technology, Industrial Electricity, Metal Machining Technology and likewise for Shielded Metal Arc Welding (SMAW) NC II for 304 hours on March 26, 2007. HIAEaC In reply, please be informed 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." A non-stock, non-profit educational institution is 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 imposed by the National Government and in certain cases to local taxes imposed by the Local Government Units under the Local Tax Code on all revenues and assets of non-stock, non-profit educational institutions used actually, directly and exclusively for educational purposes. It 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 their educational purposes or functions. (Sec. 2, Finance Department Order No. 137-87, as amended by Finance Department Order No. 92-88). Such being the case, Cojuangco Foundation, being a non-stock, non-profit educational institution, is exempt from taxes on all its revenues and assets used actually, directly and exclusively for educational purposes. However, it shall be subject to internal revenue taxes on its income from trade, business and other activity the conduct of which is not related to the exercise or performance by such educational institution of their educational purposes or functions. It may not be amiss to state that under Department Order No. 149-95 dated November 24, 1995 amending Department Order No. 137-87, interest income from currency bank deposits an yield from deposit substitute instruments used actually, directly and exclusively in pursuance of their purpose as an educational institution, are exempt from the 20% final tax and 7.5% tax on interest income under the expanded foreign currency deposit system imposed under Section 27 (D) (1) of the Tax Code of 1997, subject to compliance with the conditions that as a tax-exempt educational institution they shall on an annual basis submit to the Revenue District Office concerned an annual information return and duly audited financial statement together with the following: (a) Certification from their depository banks as to the amount of interest income earned from passive investment not subject to the 20% final withholding tax and 7.5% tax on interest income under the expanded foreign currency deposit system imposed under Section 27 (D) (1) of the Tax Code of 1997; (b) Certification of actual utilization of the said income; and (c) Board Resolution by the school administration on proposed projects ( i.e. , construction and/or improvement of school buildings and facilities, acquisition of equipment, books and the like) to be funded out of money deposited in banks or placed in money markets, on or before the 15th day of the fourth month following the end of its taxable year (Sec. 4, Finance Department Order No. 137-87). Moreover, revenues derived from assets used in the operation of cafeterias/canteens 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. DIESHT It must be emphasized that its tax exemption does not cover withholding taxes. As an educational institution, it is constituted as a withholding agent for the government required to withhold the tax on compensation income of its employees, or the withholding tax on income payments to persons subject to tax pursuant to Section 57 of the Tax Code of 1997. Under Section 235 of the Tax Code of 1997, any provision of existing general or special law to the contrary notwithstanding, the Revenue District Officer shall conduct an audit of annual information return filed, the books of accounts and other pertinent records of Cojuangco Foundation to determine compliance with the conditions set forth in the certificate of tax exemption and tax liabilities, if any. (BIR Ruling No. ENPS-006-2003 dated April 30, 2003) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service