Tax Exemption of Interest Income and/or Yield from the Philippine currency bank deposits and deposit substitutes of Non-stock, Non-profit Private Educational Institutions

December 11, 1995 REVENUE MEMORANDUM CIRCULAR NO. 45-95 SUBJECT : Tax Exemption of Interest Income and/or Yield from the Philippine Currency Bank Deposits and Deposit Substitutes of Non-stock, Non-profit Private Educational Institutions TO : All Internal Revenue Officers and Others Concerned For the information and guidance of all concerned, published hereunder is the full text of Department Order No. 149-95 issued by the Secretary of Finance, The Honorable Roberto F. de Ocampo dated November 24, 1995 exempting from the 20% final withholding tax, the interest income from Philippine currency bank deposits and yield from deposit substitute instruments used actually, directly, and exclusively for educational purposes pursuant to Section 4(3), Article XIV of the 1987 Philippine Constitution: "DEPARTMENT ORDER NO. 149-95F November 24, 1995 SUBJECT : AMENDING DEPARTMENT ORDER NO. 137-87 AS AMENDED BY DEPARTMENT ORDER NO. 92-88 IMPLEMENTING SECTION 4(3), ARTICLE XIV OF THE NEW CONSTITUTION. SEC. 1. Section 2 (2.1) of Department Order No. 137-87 as amended by Department Order No. 92-88 is hereby amended to read as follows: "2.1 NON-STOCK, NON-PROFIT EDUCATIONAL INSTITUTIONS ARE EXEMPT FROM TAXES ON ALL THEIR REVENUES AND ASSETS USED ACTUALLY, DIRECTLY AND EXCLUSIVELY FOR EDUCATIONAL PURPOSES. They 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 institution of its educational purpose or function. "2.1.1 To ensure that the exempt interest income from Philippine currency deposits and yield from deposit substitute instruments are used actually, directly, and exclusively for educational purposes, the said educational institutions shall, on annual basis submit to the Revenue District Officer, together with the annual information return and duly audited financial statement, the following: a) Certification from their depositary banks as to the amount of interest income earned from passive investments not subject to the 20% final withholding tax imposed by Section 24(e) of the Tax Code, as amended; b) Certification of actual utilization of the said income; and c) Board Resolution by the school administration on proposed projects. (i.e. constitution 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. The RDO shall conduct an audit of the annual information return filed to determine compliance with the conditions set forth in the Certificate of Exemption and the liabilities, if any. SEC. 2. Repealing Clause . All orders, circulars, rules and regulations inconsistent herewith are hereby revoked or modified accordingly. SEC. 3. Effectivity . This Order shall take effect immediately. (SGD.) ROBERTO F. DE OCAMPO Secretary It is desired that this Circular be given as wide a publicity as possible. LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue