BIR Ruling No. 504-2020

REPUBLICOF THE PHILIPPINES

BUREAU OF INTERNAL REVENUE DEPARTMENT OF FINANCE

Quezon City

Section 30 (H) of the NIRC of BIR Ruling No. 466-2014 1997, as amended; RMO No. 20-2013; RMC No. 64-2016 C20-050L2020 SEP 0 8 2UZU

Pit Evangelista, Guiwan II, Palompon, Leyte 6538 NETHERLANDS SHIPPING TRAINING CENTER FOUNDATION,INC.

Attention :ATTY.KARLA GRACE J.DELES-GELI Treasurer

Madam:

Section 30 (H) of the National Internal Revenue Code (NIRC) of 1997, as amended. NETHERLANDS SHIPPING TRAINING CENTER FOUNDATION, INC. for taX exemption certificate being enjoyed by non-stock, non-profit corporation or association under This refers to your letter, dated January 10, 2018, applying on behalf of

profit organization duly organized and existing under the laws of the Republic of the Company Registration No. incorporated are: FOUNDATION, INC. with BIR Taxpaver's Identification No. (TIN) Certificate of Registration No. Philippines; that it is registered with the Securities and Exchange Commission (SEC) under It is represented that NETHERLANDS SHIPPING TRAINING CENTER and that the purposes for which the association was dated July 09, 2008, is a non-stock, non- and

1. To update/upgrade the technical qualification of seafarers through advance and specialized maritime training courses;

2 To receive fees, donations, contributions or endowments, in cash or in

property or money as may from time to time be acquired by deed, grant. devise, bequest, gift, and the like; kind from members, students and/or other persons or entities in the maritime sector of the Philippines or abroad, and to receive such

3.To conduct course and other activities as well as research in the

maritime business and technology and to form and organize training courses in order to upgrade the qualifications of seafarers in accordance with international and Filipino standards;

4 To purchase, acquire, hold, sell, lease, exchange, mortgage or otherwise

deal in real estate and/or personal property and to build, lease, mortgage land, buildings and offices;

5. To employ personnel on regular and/or temporary basis as the case may of the Foundation; be, as may be necessary or useful to carry out the objects and purposes

NETHERLANDS SHIPPING TRAINING CENTER FOUNDATION,INC. PAGE2OF3 SH70-050L-2020 SEP 0 8 2020

6. To organize, operate and maintain dormitories, classrooms, 7.Other activities related to the career path of seafarers. laboratories, printing and publishing facilities and maritime projects: and

Section 30 (H) of the National Internal Revenue Code of 1997, as amended, provides,viz: 1997. as amended, enumerates the non-stock and/or non-profit corporations/associations/ organizations that are exempt from income tax in respect to income received by them as such In reply, please be informed that Section 30 of the National Internal Revenue Code of

shall not be taxed under this Title in respect to income received by them as "Sec. 30. Exempt from Tax on Corporations. - The following organizations

such:

XXX XXX XXX

(H) A nonstock and nonprofit educational institution;

XXX XXX XXX

to the institution's purposes and all its activities conducted not for profit".2 trustees, or officers" and that any profit "obtained as an incident to its operations shall. which the corporation was organized"Y "Non-profit" means that "no net income or asset accrues to or benefits any member or specific person, with all the net income or asset devoted whenever necessaryor proper, be used for the furtherance of the purpose or purposes for "Non-stock" means "no part of its income is distributable as dividends to its members,

Revenue Memorandum Circular (RMC) No. 64-2016, has clarified that in order for an entity to qualify as a non-stock and/or non-profit educational institution exempt from income tax under Section 30 (H) of the NIRC of 1997, as amended, it must have the following characteristics:

It is organized as a non-stock, non-profit corporation;

3. It is registered or recognized by the Department of Education (DepEd) 2. It is purposely organized as an educational institution;

Skills Development Authority; and Commission on Higher Education (CHED), or Technical Education and

4.It has no net earnings :or assets inuring to the benefit of any member,

organizer, officer or any specific person.

The corporation must be purposely established as an educational institution to offer

educational courses or programs. The corporation must operate as a primary or secondary school, a college, or a professional or.trade school that has scheduled curriculum, a regular

faculty, and enrolled student body in attendance in a place where the educational activities are

regularly carried on.

Under the above quoted provisions, one of the requirements for an educational

institution to be exempt from income tax pursuant to the provisions of paragraph 3, Section 4, Article XIV of the 1987 Constitution, in relation to Section 30 (H) of the National Internal Revenue Code of 1997, as amended, and RMC No. 64-2016, is to be registered/accredited or

recognized by the Department of Education (DepEd), Commission on Higher Education

(CHED), or Technical Education and Skills Development Authority (TESDA). However, in

the instant case,the submitted documents of NETHERLANDS SHIPPING TRAINING

2 CIR vs. St. Luke's Medical Center, Inc., G.R. Nos. 195909 and 195960 dated 26 September 2012 1 Section 87, Corporation Code G

NETHERLANDS SHIPPING TRAINING CENTER FOUNDATION INC PAGE3OF3 SH70-0504-2020 SEP 0 8 2020

CENTER FOUNDATION, INC. failed to show that it is an educational institution registered/accredited /recognized by the Department of Education (DepEd), Commission on Higher Education (CHED), or Technical Education and Skills Development Authority.

similar to organizations operated for profit. Thus, it is organized and operated principally for exclusively for its perpetuation. It appears that this activity is being carried on by profit. TRAINING CENTER FOUNDATION,INC.,show that the primary source of its revenues come from training fees, lease and meal & laundry service fees. Such proceeds are being used NETHERLANDS SHIPPING TRAINING CENTER FOUNDATION,INC.in a mannen Moreover, the Audited Financial Statements of NETHERLANDS SHIPPING

this reason alone, completely exempt an institution from tax.3 Thus, "statutes granting tax taxing authority. A claim of tax exemption must be clearly shown and based on language in exemptions are construed strictissimi juris against the taxpayer and liberally in favor of the The burden of proof rests upon the party claiming the exemption to prove that it is in fact law too plain to be mistaken. Otherwise stated, taxation is the rule, exemption is the exception. covered by the exemption so claimed.34 (BIR Ruling No. 466-2014 dated November 19, 2014) Please bear in mind that, "being a non-stock and/or non-profit corporation does not, by

SHIPPING TRAINING CENTER FOUNDATION,INC.does not qualify for exemption treated as an ordinary corporation subject to thirty percent (30%) income tax rate pursuant to under Section 30 (H) of the National Internal Revenue Code of 1997, as amended. Therefore. NETHERLANDS SHIPPING TRAINING CENTER FOUNDATION, INC. shall be Section 27 (A) and other internal revenue taxes imposed by the National Internal Revenue Code of 1997, as amended. IN VIEW OF THE FOREGOING, this Office is of the opinion that NETHERLANDS

Very truly yours,

aeM

Commissioner of Internal Revenue CAESAR R. DULAY

K-1-JAC 036587c

4Quezon City and The City Treasurer of Quezon City vs. ABS-CBN Broadcasting Corporation [G.R.No.166408,6 October 3CIR vs. St. Luke's Medical Center,Inc. [G.R. No. 195909& G.R. No.195960, 26 September 2012]. 2008].