Angeles Liplin School Incorporated

June 23, 2009 BIR RULING [NSNP-(S30H-069) 385-09] Section 30 (H); 149-95; DA-283-04; S30027-2003 & S30-040-02 Angeles Liplin School Incorporated Mabini St., San Nicolas, Angeles City Attention: Mr. Chua Sin Kwok Chairman-Board of Trustee Gentlemen : This refers to your letter dated May 6, 2009 requesting for a ruling exempting the Angeles Liplin School Incorporated ("ALSI" for brevity) from payment of taxes. As represented, ALSI is a non-stock, non-profit educational institution with Taxpayer Identification No. 117-049-720. It was incorporated sometime in 1959 with the Securities and Exchange Commission (SEC) under SEC Registration No. 15248. ALSI was given recognition by the Department of Education (DepEd) on June 4, 1998, with Government Recognition No. E-018, Series of 1998, for its pre-elementary course. The primary purpose for which it was incorporated and as reflected in its articles is "to operate and manage an Elementary and High School". The main source of its income are tuition fees. In reply, please be informed 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 use actually, directly and exclusively for educational purposes shall be exempt from taxes and duties. . . ." The exemption under Section 4 (3), Article XIV of the 1987 Constitution 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 (BIR Ruling No. 248-88 dated June 6, 1988). Likewise, in recognition of the foregoing provision of the Constitution, Section 30 (H) of the Tax Code of 1997, as amended, specifically exempts a non-stock, non-profit educational institution from income tax. As a non-stock, non-profit educational institution, ALSI, therefore, is exempt from tax on all revenues derived in pursuance of its purpose as an educational institution. LexLib However, it is subject to internal revenue taxes on income from trade or business or other activity the conduct of which is not related to the exercise or performance of its educational purposes or functions (Section 2, Finance Department Order No. 137-87, as amended by Finance Department Order No. 92-88). Under Department Order No. 149-95 dated November 24, 1995 amending Department Order No. 137-87, as amended, interest income from currency bank deposits and yield from deposit substitute instruments used actually, directly and exclusively in pursuance of its purpose, as, an educational institution are exempt from the 20% final tax and 7 1/2% tax on interest income under the expanded foreign currency deposit system imposed under Section 27 (D) (1) of the 1997 Tax Code subject to compliance with the conditions that as a tax-exempt educational institution it 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 depository banks as to the amount of interest income earned from passive investment not subject to the 20% final withholding tax and 7 1/2% tax on interest income under the expanded foreign currency deposit system imposed by Sec. 27 (D) (1) of the 1997 Tax Code; 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 the 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; ENPS-012-98 dated November 25, 1993; BIR Ruling No. 46-00 dated September 26, 2000; and BIR Ruling No. DA-283-04 dated May 24, 2004). 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, or that the requirements herein stated are not complied with, then this ruling shall be considered null and void. Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service