Documente Academic
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EDUCATIONAL INSTITUTIONS
By LAW
PURPOSE OF SESSION
(a) Review Certain Outstanding Issues
Bills for Tax and Tariff Duty Exemptions for Educational Institutions
THE STATE RECOGNIZES THE COMPLEMENTARY ROLES OF PUBLIC AND PRIVATE INSTITUTIONS IN THE EDUCATIONAL SYSTEM AND SHALL EXERCISE REASONABLE SUPERVISION AND REGULATION OF ALL EDUCATIONSL INSTITUTIONS.
SEC. 4(1), ART. XIV, 1987 CONSTITUTION
and
nonprofit
DOF ORDER NO. 137-87 (16 December 1987): Exemptions granted to Nonstock Nonprofit Educational Institutions refer to internal revenue taxes and customs duties imposed by the National Government on all revenues and assets of non-stock and nonprofit educational institution.
Devotes all its income, whether students fees or gifts, donations, subsidies, etc. to the accomplishment and promotion of the purposes for which it was organized.
Exemptions not limited to revenues and assets derived from strictly school operations, but also extends to incidental income derived from canteen, bookstores and dormitory facilities.
In case of incidental income, the facilities must not only be owned and operated by the educational institutions but must be located inside school premises.
Canteens operated by concessionaire are taxable.
Income unrelated to school operations like income from such deposits or trust funds, royalties, dividends and rental income are all taxable. Use of educational institutions income or assets must all be school-related (e.g., scholarship, faculty development, professorial chairs, building expenses, library, sports facilities). A canteen, although owned and operated by a concessionaire of the schools, is exempted from income tax and VAT as long as the concessionaire fees were actually, directly and exclusively used for educational purposes.
ATENEO DE MANILA UNIVERSITY VS. CIR, CTA CASE NO. 7246 & 7293, 11 March 2010
Private
(a) Expenditures otherwise considered as capital outlays or depreciable assets incurred during the taxable year for the expansion of school facilities, or (b) Deductions allowed for depreciation.
Income from school-related activities is tax exempt, but when invested in the money market, the income earned from such investment is taxable.
DOF ORDER NO. 137-87
Earnings from such passive investments are to used directly, exclusively and actually for educational purposes or function, shall be exempt from the 20% final withholding tax pursuant to Sec. 4(3), Art. XIV of the Constitution.
BIR RULING NO. 197-90
Instant income from passive investments are exempt from tax, provided the educational institutions submit an annual information return with the following:
(a) Bank certificate of the amount of instant income; (b) Certificate of actual utilization of said income, and (c) Board resolution of the administration of proposed projects to be funded, on or before the 14th day of the month following the end of taxable year.
Private Educational Institutions exempted from VAT provided they accredited by the DepEd, CHED, TESDA.
are are
HOWEVER: VAT Exemption does not extend to other activities involving sale of goods and services.
SEC. 109(M), 1997 NIRC REV. MEM. CIRCULAR NO. 76-2003
Educational Institutions must register as a NonVAT Taxpayer to avoid shifting by VATRegistered seller or supplier. Educational Services rendered by accredited Private Educational Institutions are exempt from VAT.
SEC. 109(M), NIRC
EDUCATIONAL INSTITUTIONS
All grants, endowments, donations or contributions to non-stock and non-profit educational institutions used actually, directly and exclusively for educational purposes are taxexempt.
DOJ OPINION 130, S. 1987
Gifts in favor of educational institutions are exempt from donors tax provided not more than 30% of said gifts shall be used by such donee for administrative purposes.
SEC. 101, 1997 NIRC
All properties of educational institutions, actually, directly and exclusively used for educational purposes are exempt from real property taxes.
SEC. 234, LOCAL GOVERNMENT CODE
INTERPRETATION
Exclusively is defined as possessed and enjoyed to the exclusion of others; debarred from participation or enjoyment; and exclusively is defined, in a manner to exclude; as enjoying a privilege exclusivelyThe words dominant use or principal use cannot be substituted for the words used exclusively without doing violence to the Constitution and the law. Solely is synonymous with exclusively.
Lung Center of the Philippines v. Quezon City G.R. No. L-39086, June 5, 1988
. . . Moreover, the exemption in favor of property used exclusively for charity used exclusively for charitable or educational purposes is not limited to property actually indispensable therefor (Colley on Taxation, Vol. 2, p. 1430), but extends to facilities which are incidental to and reasonably necessary for the accomplishment of said purposes, such as in the case of hospitals, a school for training nurses, a nurses home, property used to provide housing facilities for interns, resident doctors, superintendents, and other members of the hospital staff, and recreational facilities, for student nurses, interns and residents (84 CJS 6621), such as athletic fields including a farm used for the inmates of the institution.
Herrera v. Quezon City Board of Assessment Appeals, 3 SCRA 186 (1961) BIR v. Bishop of the Missionary District, 14 SCRA 991 (1965) Abra Valley College, Inc. v. Aquino, 162 SCRA 106.
The exemption from real property taxes however, shall not include machineries even if these are actually, directly and exclusively foreducational purposes.
DOF ORDER NO. 137-87 (16 December 1987): Exemptions granted to Non-Profit and Non-Stock Educational Institutions refer to internal revenue taxes and customs duties imposed by the National Government on all revenues and assets of nonstock and nonprofit educational institution.
II
PROPOSED BILLS ON COMPREHENSIVE EXEMPTIONS
FROM INTERNAL REVENUE TAXES, REALTY TAXES AND TARIFF DUTIES FOR EDUCATIONAL INSTITUTIONS