BIR Ruling No. 793-2019

REPUBLIC OF THE PHILIPPINES

DEPARTMENT OF FINANCE

BUREAU OF INTERNAL REVENUE

Quezon City

Section 30 of the National Internal Revenue Code of 1997, as amended BIR Ruling No. 001-2017: BIR Ruling No. 444-2014 0793-2049 DEC 17 2019

Hilltop Village, Brgy.Magsaysay, Polomolok, South Cotabato GREEN ADVANCED KEST & ARTS ACADEMY, INC.

Attention: REV.KIM YOUNG KYUN

President

Gentlemen:

ADVANCED KEST & ARTS ACADEMY,INC. for the^issuance of a certificate of tax exemption enjoyed by non-stock, non-profit corporation or association pursuant to Section 30 This refers to your letter dated June 01. 2018. requesting on behalf of GREEN

of the National Internal Revenue Code (NIRC) of 1997, as amended.

BIR Taxpayer's Identification No.(TIN association duly organized and existing under the laws of the Republic of the Philippines; that It is represented that GREEN ADVANCED KEST & ARTS ACADEMY,INC.with is a non-stock, non-profit

it is registered with the Securities and Exchange Commission (SEC) under Company 2016; and that the purposes for which the corporation/association was incorporated are: Registration No. and with SEC Certificate of Incorporation dated August 09

1 To establish and operate an educational institution for Junior High School, Senior

To receive tuitions and miscellaneous fees, accept donations, endowments, grants, High School.

legacies and instruments/devices conformable with existing applicable statutes.

3 To establish specialized fields of education specifically designed for special

children or those with special problems or learning disabilities such as, but not limited to auditory, linguistic, orthopedic, or other learning disabilities or

1 To undertake any other activities related to the establishment and operation of said impairments.

Provided that the registration of this articles of incorporation shall not be educational institutions.

constructed as a grant of permit to operate the school/institution of learning. The

establishment, operation, administration and management of the school shall be

subject to existing rules and regulation, policies and standards of DepEd that shall

be complied with before said school may be allowed to operate. Said school

compliance shall be evidenced by a certificate duly issued by DepEd.

In reply, please'be informed that this Office cannot as yet issue the requested

Certificate ofTax Exemption because GREEN ADVANCEDKEST&ARTS

ACADEMY, INC. has to prove by actual operation for at least three (3) years that it is really

an association exempt from income tax under Section 30 of the National Internal Revenue Code

of 1997, as amended. (BIR Ruling No.001-2017 dated January 05, 2017)

In the meantime,GREEN ADVANCED KEST & ARTS ACADEMY,INC. is

subject to the corresponding internal revenue taxes imposed under the National Internal

GREEN ADVANCED KEST & ARTS ACADEMY,INC 0793-2019 DEC 1 7 2019

Revenue Code of 1997, as amended, 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.

benefits from deposit substitute instruments and from trust funds and similar arrangements, and royalties derived from sources within the Philippines are subject to the twenty percent (20%) final withholding tax: provided, however, that interest income derived by it from a depository Likewise, interest income from currency bank deposits and yield or any other monetary

bank under the expanded foreign currency deposit system shall be subject to fifteen percent (15%) final withholding tax pursuant to Section 27 (D) (1), in relation to Section 57 (A), both of the National Internal Revenue Code of 1997, as amended. (BIR Ruling No. 444-2014 dated October 30, 2014)

ACADEMY, INC. shall be constituted as withholding agent of the government if it acts as an implemented by Revenue Regulations No. 2-98, as amended. Section 79 (A), Chapter XIII, Title II of the National Internal Revenue Code of 1997, as amended, as implemented by Revenue Regulations No. 2-98, as amended, or if it makes income in Section 57 (B) of the National Internal Revenue Code of 1997, as amended, also as employer and its employee receives compensation income subject to the withholding tax under payments to individuals or corporations subject to the expanded withholding tax provided for Also. it should be understood that GREEN ADVANCED KEST & ARTS

Moreover, under Section 235 of the National Internal Revenue Code of 1997, as

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 tax liabilities, if any. amended, any provision of existing general and special law to the contrary notwithstanding, with the conditions under which it has been granted tax exemptions or tax incentives, and its

Furthermore, it is subject to the payment of the annual registration fee of Five Hundred Pesos (PhP500.00) as prescribed in Section 236 (B) of the National Internal Revenue Code of

invoices for each sale or transfer of merchandise or for services rendered which are not directly related to the activities for which the Association is registered under Section 6 (C) in relation 1997, as amended. It is also required to issue duly registered receipts or sales or commercial

to Section 237 of the same Code [Revenue Memorandum Circular (RMC) No. 76-2003].

Value-Added Tax/Percentage Tax

Section 105 of the National Internal Revenue Code of 1997, as amended, provides that:

"SEC. 105. Persons Liable. - Any person who, in the course of trade or

tax (VAT) imposed in Sections 106 to 108 of the same Code. services, and any person who imports goods shall be subject to the value-added business, sells, barters, exchanges, leases goods or properties, renders

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The phrase "in the course of trade or business" means the regular

transactions incidental thereto, by any person regardless of whether or not the conduct or pursuit of a commercial or an economic activity, including

person engaged therein is a non-stock, non-profit private organization

(irrespective of the disposition of its net income and whether or not it sells exclusively to members or their guests), or government entity.

Republic Act No. 10963 increased the tax rate from 7.5% to 15% effective January 1, 2018.

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GREEN ADVANCED KEST & ARTS ACADEMY, INC 0793-2019 DEC 1 7 2019

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incidental thereto, in general, it shall be liable for 12% VAT, in case the gross receipts from such sales exceed Three Million Pesos (P3,000,000.00)2, or to the 3% percentage tax, if gross in the sale of goods or services in the course of a business pursuit, including transactions Accordingly,if GREEN ADVANCED KEST & ARTS ACADEMY,INC. is engaged

receipts do not exceed P3,000.000.00.

Notwithstanding that it is a non-stock, non-profit corporation, its purchase of goods or properties or services and importation of goods shall nevertheless be subject to the 12% VAT pursuant to Sections 106 to 108 of the said Code.

It must be noted that VAT is an indirect tax payable by the seller and not by the purchaser of goods. Being an indirect tax, the amount of tax may be shifted or passed on to the buyer/purchaser, transferee or lessee of the goods, properties or services. Once shifted to the buyer/customer as an addition to the cost of goods or services sold, it is no longer a tax but an additional cost which the buyer/customer has to pay in order to obtain the goods or services.

However, revenue from contributions and donations, not being derived from sale of services or sale of goods made in the course of business but rather in connection with its educational activities, is exempt from the 12% VAT.

Finally, for purposes of securing a Certificate of Tax Exemption after the three (3)-year period, GREEN ADVANCED KEST & ARTS ACADEMY,INC. is

required to submit the following documents pursuant to Revenue Memorandum Order

(RMO) No. 44-2016 dated July 21,2016:

A. Original copy of application letter for issuance of Tax Exemption Ruling.

The letter shall cite the particular paragraph of Section 30 of the National

Internal Revenue Code of 1997, as amended, under which the application

for exemption / revalidation is being based:

B. Original copy of Certificate of Operation/Good Standing with the Securities

and Exchange Commission (SEC);

C. Original copy of a Certification under Oath by the treasurer of the

association as to the amount of income, compensation, salaries or any

emoluments paid by the association to its trustees, officers and other

executive officers;

D. Certified true copy of government recognition/permit/accreditation to

operate as an educational institution issued by the Commission on Higher

Education (CHED), Department of Education (DepEd), or Technical

Education and Skills Development Authority (TESDA);

E. If the government recognition/permit/accreditation to operate as an

education institution was issued'more than five (5) years prior to the

application for tax exemption/revalidation, an original copy of a current

Certificate of Operation/Good Standing, or other equivalent document,

issued by the appropriate government agency (i.e. CHED, DepEd, or

TESDA) shall be submitted as proof that the non-stock and non-profit

educational institution is currently operating as such;

2 Republic Act No. 10963 increased the VAT threshold from P1,919,500.00 to P3,000,000.00 effective January 1, 2018.

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GREEN ADVANCED KEST & ARTS ACADEMY, INC. 0793-2019 DEC 1 7 2019

F. Certified true copies of its Financial Statements for the last three (3) years of operation; and

G. Original copy of Certificate of utilization of annual revenues and assets by the Treasurer or his equivalent of the non-stock and non-profit educational institution. In accordance with the guidelines set forth in Section 1.3 of

provide a breakdown of the following: Department of Finance (DOF) Order No. 137-87, the Certificate shall

paid or utilized to accomplish one or more purposes for which the Any amount in cash or in kind (including administrative expenses) of scholarship to deserving students and professorial chairs for the enhancement of professional course. educational institution was created or organized, including grant

Any amount paid to acquire an asset used (or held for use) directly

organized, including the upgrading of existing facilities to support in carrying out one or more purposes for which it was created or the conduct of the above activities.

iii. Any amount in cash or in kind invested in an activity related to the

educational purposes for which it was created or organized.

iv. Any amount set aside for a specific project, which must be

supported by a Board Resolution issued by the school

administration on proposed projects (i.e., construction and/or improvement of school buildings and facilities, acquisition of equipment, books and the like) to be funded out of the money deposited in banks or placed in money markets, on or before the 15th day of the fourth month following the end of its taxable year.

if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered null and void. This ruling is being issued on the basis of the foregoing facts as represented. However.

Very truly yours,

1agaMwa

K-1-JAC Commissioner of Internal Revenue CAESAR R.DULAY 031385

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