Philippine Merchant Marine Academy

June 24, 2009 BIR RULING [NSNP-(S30I-001) 390-09] 27 (D) (1); S-30-008-2006 Philippine Merchant Marine Academy San Narciso Zambales Attention: RADM Fidel E. Dioso PMMA President Gentlemen : This refers to your letter dated May 7, 2009 requesting for exemption from the payment of income tax and other taxes and the filing of the corresponding income tax return under Section 30 (I) of the Tax Code of 1997. It is represented that the Philippine Merchant Marine Academy (PMMA) is one of the oldest educational institution of the Philippines established on April 5, 1820 by virtue of the Spanish Royal Decree, as the Escuela Nautica de Manila located at Calle Cabildo in Intramuros; that in May 1963, Republic Act (RA) No. 3680 converted it into Philippine Merchant Marine Academy (PMMA); that from Calle Cabildo, it was transferred from one site to another, and on February 2, 1998, PMMA was transferred to its new and permanent site at San Narciso, Zambales; that Executive Order (EO) No. 292 (Administrative Code of 1992) Title XV, Chapter 6, Section 23 provides that PMMA is one of the attached agencies of the Department of Transportation and Communications (DOTC); and that by virtue of RA No. 8292, the PMMA is attached to the Commission on Higher Education (CHED) for purposes of policy and program coordination. Based on the foregoing, this Office is of the opinion and so holds that the PMMA is a corporation organized for educational development and social welfare as contemplated under Section 30 (I) of the Tax Code of 1997. Accordingly, it is exempt from the payment of income tax on income received by it as such organization, and therefore, need not file an income to return concerning such income. IcDESA However, it is subject to the corresponding internal revenue taxes imposed under the National Internal Revenue Code on its income derived from any of its properties, real or personal, or any activity conducted for profit regardless of the disposition thereof, which income should be returned for taxation. Likewise, interest income from currency bank deposits and yield or any other monetary benefits from deposit substitute instruments and from trust funds and similar arrangements, and royalties derived from sources within the Philippines are subject to the 20% final withholding tax: provided, however, that interest income derived by it from a depository bank under the expanded foreign currency deposit system shall be subject to 7 1/2% final withholding tax pursuant to Section 27 (D) (1), in relation to Section 57 (A), both of the Tax Code of 1997. Moreover, it is required to file on or before the 15th day of the fourth month following the end of the accounting period a Profit and Loss Statement and Balance Sheet with the Annual Information Return under oath, stating its gross income and expenses incurred during the preceding period and a certificate showing that there has not been any change in its By-laws, Articles of Incorporation, manner of operation and activities as well as sources and disposition of income. Donor's Tax Inasmuch as the donee is an educational institution, donation from its benefactors is exempt from the payment of donor's tax pursuant to Section 101 (A) (3) of the Tax Code of 1997, subject to the condition that not more than thirty percent (30%) of said gift shall be used for administration purposes. Moreover, the Deed of Donation is not subject to documentary stamp tax. However, the acknowledgement on said deed is subject to the documentary stamp tax of P15.00 imposed under Section 188 of the Tax Code of 1997, as amended. Value-Added Tax Section 4.109-1 (B) (1) (h) of Revenue Regulations No. 16-2005, as amended, implementing RA No. 9337, provides that educational services rendered by private educational institutions duly accredited by the Department of Education (DepEd), the Commission on Higher Education (CHED) and the Technical Education and Skills Development Authority (TESDA) and those rendered by government educational institutions shall be exempt from VAT. ESTCHa Accordingly, educational services rendered by PMMA shall be exempt from VAT. However, its purchases from VAT registered entities shall be subject to the 12% VAT pursuant to Sections 106 of the Tax Code of 1997, as amended by RA No. 9337. It is requested that a copy of this letter of exemption be attached to the annual information return which Equitable Foundation, Inc. will file on or before the 15th day of the fourth month of each year. Under Section 235 of the Tax Code of 1997, any provision of existing general and special law to the contrary notwithstanding, the books of accounts and other pertinent records of tax-exempt organization or grantees of tax incentives shall be subject to examination by the BIR for purposes of ascertaining compliance with the conditions under which they have been granted tax exemptions or tax incentives, and their tax liabilities, if any. It should be understood that the said exempt non-government organization shall be constituted as withholding agent of the government if it acts as an employer and its employee receives compensation income subject to the withholding tax under Section 79 (A), Chapter XIII, Title II of the Tax Code of 1997, as implemented by Revenue Regulations (Rev. Regs.) No. 2-98, as amended, or if it makes income payments to individuals or corporations subject to the expanded withholding tax provided for in Section 57 (B) of the Tax Code of 1997, also as implemented by Rev. Regs. No. 2-98, as amended. Moreover, income payments made to Equitable Foundation, Inc., as a tax-exempt corporation, is not subject to creditable withholding tax pursuant to Section 2.57.5 (B) (3) of Revenue Regulations No. 2-98, as amended. 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, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service