AMA Computer University, Inc.

July 28, 2009 BIR RULING [NSNP-(S30H-082) 463-09] par. 3, Sec. 4 Art. XIV, 1987 Constitution AMA Computer University, Inc. AMA Building II, # 59 Panay Avenue Quezon City Attention: Mr. Arnel F. Hibo VP-Operations Gentlemen : This refers to your letter dated July 08, 2009 requesting, in effect, for a clarification of BIR Ruling NSNP (S30H-72) 401-2008 dated June 30, 2009 ("subject ruling") relative to the tax exemption of AMA Computer University, Inc. (AMACU) . Documents submitted disclose that the subject ruling was issued upon your request to revalidate the tax exemption previously granted to AMACU (formerly AMA Computer College of Quezon City, Inc.) by the Legal Division of Revenue Region No. 7 under BIR Ruling No. ENPS-013-2001 dated March 12, 2002; that subject ruling confirmed the tax exemption of AMACU as a non-stock, non-profit educational institution under par. 3, Sec. 4, Art. XIV of the 1987 Constitution; and that one of the exemptions granted to AMACU is in connection with value-added tax (VAT) and customs duties arising from its importation of books, films, slides and other educational materials and equipment such as computers to be actually, directly and exclusively used for educational purposes. It was further disclosed that on October 31, 2008, AMACU imported personal computers and peripherals which were tentatively released by the Department of Finance (DOF) after AMACU posted a surety bond and pending verification with the Securities and Exchange Commission (SEC) that AMACU is indeed a non-stock, non-profit educational institution. It is your position that by virtue of the subject ruling which confirmed and revalidated BIR Ruling No. ENPS-013-2001, this Office effectively ruled that such tax exempt status was already being enjoyed by AMACU since 2002 and thus covers AMACU's importation for 2008. SaIHDA In reply, please be informed that the subject ruling in favor of AMACU merely confirmed the entitlement of AMACU to tax exemptions as a non-stock, non-profit educational institution based on the documents submitted to this Office on June 26, 2009, in particular, its Amended Articles of Incorporation dated January 12, 2009 which explicitly provides that AMACU is a non-stock, non-profit educational institution. While the subject ruling does reiterate the exemptions stated in the alleged ruling issued by the Legal Division of RR7, it does not make any reference to the previous ruling in granting AMACU's tax exemption. Likewise, there is no discussion of its 2008 importation and the application of the subject ruling to said importation. Thus, there is no basis to conclude that the subject ruling effectively held that AMACU has been enjoying a tax-exempt status since 2002 which may be used to support the exemption of its previous importation from VAT and customs duties. On the matter of whether AMACU should be entitled to tax exemption for its importation in 2008, please be informed that in BIR Ruling No. DA-234-2004 dated May 7, 2004 , this Bureau had occasion to rule that the importation of books, films, slides and other educational materials and equipment such as computers to be actually, directly and exclusively used for educational purposes shall be exempt from the value-added tax and customs duties, provided the guidelines provided under Department Order No. 137-87 in addition to the usual import requirements are observed. (Citing BIR Ruling No. 248-88 dated June 6, 1988 and BIR Ruling No. 130-90 dated July 4, 1990) . The above exemption is granted to all non-stock, non-profit educational institutions. As a condition to confirming tax exemptions, this Office requires that the Articles of Incorporation of an educational institution must include a provision that that the school is organized as a "non-stock, non-profit corporation". This Office notes that prior to 2009, the SEC Registration of AMACU (then AMA Computer College of Quezon City, Inc.) merely carries the term "non-stock" in its Articles of Incorporation. Be that as it may, it has been clarified in a subsequent letter confirmation from SEC (dated October 22, 1999) that with respect to the registration of AMACU's Computer Learning Centers, there is no distinction between the words "non-stock, non-profit" and "non-stock" in that the inclusion of the word "non-profit" in the Articles of Incorporation only affirms and stresses that the corporation is a non-stock corporation. On the basis of the foregoing, it is clear that since 1986, AMACU has been registered with SEC as a non-stock, non-profit educational institution. Such being the case, it is entitled to the exemptions provided under the Constitution. Considering that its importation in 2008, as purported, is actually, directly and exclusively used for educational purposes, this Office is of the opinion that the said importation is exempt from VAT and customs duties provided, however, that the conditions laid down in Department Order 137-07 are met, viz. : ADaSET "A. The importer shall, prior to the importation, apply with the Department of Education, Culture and Sports for duty and tax exemption executed under oath by a duly authorized representative of the institution and supported by the following documents: 1) A copy of the charter or other evidence of the character of the institution for which the articles are imported and the original of any order given by the institution to an importing agent/dealer for such articles, if imported by the latter; 2) An affidavit executed by the importer stating, among others, that the imported articles are to be used actually, directly and exclusively for educational purposes, and that the same will be installed/used in its buildings/premises located at _____________ used actually, directly and exclusively for educational purposes; and 3) Should the importation be made through a dealer or indentor, an affidavit of both the dealer or indentor and the ultimate consignee whose identity is indicated in the shipping documents. Such affidavit shall state the partly who placed the order, the number of items and their respective values and such other matters as are related to the transaction; B. The Department of Education, Culture and Sports shall verify and certify that the educational institution is non-stock, non-profit and that the imported articles are to be used actually, directly and exclusively for educational purposes and shall indorse the application for duty and tax exemption to the Department of Finance with appropriate recommendation; C. The Department of Finance, based on the recommendation of the Department of Education, Culture and Sports, may allow the tax and/or duty-free entry of articles referred to under Section 4 (3), Article XIV of the New Constitution upon compliance with the requirements herein indicated. This does not, however, preclude the Department of Finance from requiring the submission of additional documents/undertakings should the need arise; and D. Articles entered tax and/or duty-free by educational institutions may not be sold, transferred or otherwise disposed of in any manner whatsoever to any person without the prior approval of the Department of Finance. Any transferee of said article should be deemed the importer thereof, and the same shall be assessed at its entered value without depreciation." HTaSEA Since the issue of AMACU's compliance with the foregoing requirements which would entitle it to tax exemptions is a question of fact, this Office defers to rule on the matter inasmuch as a question of fact is considered as a "no-ruling area" pursuant to Section 1 of Revenue Bulletin 01-03. 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 as null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service