The 2020 Revised Rules of the Judicial and Bar Council

July 27, 1972 Missionary Sisters of the Immaculate Heart of Mary 61 Banawe St., Quezon City Reverend Sisters : In reply to your letter dated June 16, 1972, I have the honor to inform you as follows: Schools established by religious congregations are exempt from income tax on their income from tuition fees matriculation fees and other income from the operation of the schools pursuant to Section 27(e) of the Tax Code. There would not seem, therefore, to be any occasion for the application of dedications from gross income. However, income of the schools from any activity conducted for profit or from any of their properties is subject to income tax. The expenditures for the support of sisters of congregation who assist and supervise the operation of the schools may be deducted from such gross income as ordinary and necessary expenses. cdt The exemption of schools maintained by religious corporations remains notwithstanding their failure to secure a prior certificate of exemption from this Office as provided for by Section 24 of the Income Tax Regulations. However, the failure to secure a prior certificate of exemption constitutes a violation of the regulations which may be punishable under Section 352 of the Tax Code. In this connection, it is suggested that the congregation should now apply for a certificate of tax exemption. Retirement benefits received by retirees under a reasonable private retirement plan are exempt from income tax. Contribution by the schools to the retirement plan is deductible from their taxable income. However, in implementing R.A. 4917 which provides for such exemption, the retirement plan of the schools should be submitted to this Office for appropriate processing as to their qualification as a reasonable private retirement plan. The proceeds from the operation of the school canteen, even if exclusively catering to the school population, is subject to the 3% tax prescribed by Section 191(A) of the Tax Code. The schools should furthermore provide themselves with P50.00 fixed annual tax pursuant to Section 182(A) of the Tax Code.' Donations made by a religious school to its motherhouse (the congregation) is exempt from gift taxes under the principle that it is a transfer merely from one hand to another. This is so because the school and the congregation is one and the same. The donations from the Mother Congregation abroad to its Philippine Province for exclusively religious purposes are also exempt from the gift taxes and all other taxes pursuant to R. A. No. 1916. Very truly yours, MISAEL P. VERA Commissioner of Internal Revenue