QuestionsQuestions (BIR REVENUE MEMORANDUM CIRCULAR NO. 76-2003)
They are exempt from income tax on income received by them “as such organization,” i.e., income that qualifies under Section 30 as exempt.
No. They are subject to internal revenue taxes on income derived from their properties (real or personal) or from any activity conducted for profit, regardless of the disposition of that income (e.g., rental income must be returned for taxation).
Rental income from the corporation’s building/premises.
It is subject to a 20% final withholding tax.
Interest income derived by them from a depository bank under the expanded foreign currency deposit system is subject to a 7½% final withholding tax pursuant to Section 27(D)(1) in relation to Section 57(A) of the Tax Code of 1997.
If it acts as an employer (where employees receive compensation income subject to withholding tax under Section 79(A)) and/or if it makes income payments to individuals or corporations subject to withholding tax under Section 57 (as implemented by RR No. 2-98).
Paragraph 3, Section 4, Article XIV of the Constitution—exemption for internal revenue taxes on revenues and assets used actually, directly, and exclusively for educational purposes.
Revenues derived from assets used in the operation of cafeterias/canteens and bookstores are exempt if they are owned and operated by the educational institution as ancillary activities and located within the school premises.
They are exempt from VAT if accredited by either the Department of Education, Culture and Sports or the Commission on Higher Education, but the exemption does not extend to other activities involving sale of goods and services.
They are subject to internal revenue taxes on income from trade, business, or other activities not related to the exercise/performance of their educational purposes or functions—e.g., rental income from buildings/premises.
When the interest income from currency bank deposits and deposit substitute instruments is used actually, directly, and exclusively in pursuance of the educational institution’s purposes.
Annually submit to the RDO an annual information return and audited financial statements plus: (1) a certification from the depository bank of interest income not subject to the 20% final tax and 7½% tax; (2) certification of actual utilization of the income; and (3) a board resolution on proposed projects (construction/improvement/equipment/books) to be funded out of the deposited funds, on or before the 14th day of the fourth month after the end of its taxable year.
No. The exemption does not cover withholding taxes. Educational institutions still must withhold taxes on compensation of employees and on income payments to persons subject to tax under Section 57.
They must maintain books of accounts as prescribed in Section 235, pay the annual registration fee of P500.00 under Section 236(B), and issue duly registered receipts or sales/commercial invoices for each sale/transfer of merchandise or for services rendered not directly related to the activities for which they are registered (Section 237 via Section 6(C)).
To monitor the activities being conducted by these institutions, especially because they remain subject to certain taxes and withholding obligations.
It is treated as income derived from its properties and/or activities conducted for profit; hence it is subject to internal revenue taxes and must be returned for taxation.
Income from trade, business, or other activities not related to its educational purposes or functions—specifically giving the example of rental payments from its building/premises.