BIR Ruling No. 501-2020

REPUBLICOF THE PHILIPPINES

DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE

Quezon City

Par. 3, Sec. 4, Art. XIV of the 1987 BIR Ruling Nos.466-14 NIRC of 1997, as amended; RMO Nos. 20 2013 and 44-2016 Constitution; Sections 30 (E) and (H) of the CH30-0501-2020 SEP 0 8 2020

Annayatan, Baggao, Cagayan 3506 BMS CHRISTIAN INSTITUTE, INC.

Attention: Administrator Teddy R. Gamata

Gentlemen:

amended. CHRISTIAN INSTITUTE. INC. for the issuance of a certificate of tax exemption enjoyed by a non-stock, non-profit corporation or association organized and operated exclusively for educational purposes under Section 30(H) of the Tax Code of 1997, as This refers to your letter dated June 5, 2018, applying on behalf of BMS

registered with the Securities and Exchange Commission (SEC) under Company Registration No. was incorporated is to establisn and operate an educational institution or learning center which shall provide courses of study in Pre-Elementary and Elementary Level subject to the laws of the Philippines; and that it was granted Government Permit (R-02) No Identification No.(TIN) organized and existing under the laws of the Republic of the Philippines; that it is It is represented that BMS CHRISTIAN INSTITUTE,INC.with BIR Taxpayer's on March 27.2018. dated"April 28, 2015, is a non-stock, non-profit association duly ; and that the primary purpose' for which the association and Certificate of Registration No.

Constitution states that: In reply, please be informed that paragraph 3, Section 4, Article XIV of the 1987

educational institutions used actually, directly, and exclusively for educational purposes shall be exempt from taxes and duties." All revenues and assets of non-stock, non-profit

as amended, provides, viz: Similarly, Section 30 (H) of the National Internal Revenue Code (NIRC) of 1997,

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

XXX XXX XXX

1Amended Articles of Incorporation, adopted on May 12, 2017.

H3C-0501-202

Page 2 BMS CHRISTIAN INSTITUTE, INC SEP 0 8 2020

H A non-stockand non-profiteducational institution: xxx.

institution to be exempt from tax as provided under Revenue Memorandum Order (RMO) No. 44-2016; to wit: Moreover, there are two requisites in order for a non-stock, non-profit educational

b a It is a non-stock, non-profit educational institution; and Its revenues are actually, directly and exclusively used for educational

purposes.

that "no net income or asset accrues to or benefits any member or specific person, with members, trustees, or officers" and that any profit "obtained as an incident to its purpose or purposes for which the corporation was organized"2 "Non-profit" means conducted not for profit".3 all the net income or asset devoted to the institution's purposes and all its activities operations shall, whenever necessary or proper, be used for the furtherance of the "Non-stock" means "no part of its income is distributable as dividends to its

In the submitted documents of BMS CHRISTIAN INSTITUTE, INC., it was disclosed that the Board of Trustees and Officers are entitled to allowances. The Treasurer's Affidavit/Certification states that:

3 That as such, I hereby that the trustees, officers and faculty

members serve in missionary capacity only and are given only minimal allowances to defray their transportation and necessities as the circumstances call."

The giving of allowances to the members of the Board of Trustees is considered as distribution of equity (including the net income) of BMS CHRISTIAN INSTITUTE

INC. This is a form of private inurement which the law prohibits in the organization

and operation of a non-stock, non-profit corporation. This act violates the requirement

that no part of the net income or assets of the corporation shall inure to the benefit of any individual or specific person. Thus, BMS CHRISTIAN INSTITUTE, INC. cannot be qualified as a non-stock, non-profit educational institution under Section 30 (H) of the National Internal Revenue Code of 1997, as amended.

not, by this reason alone, completely exempt an institution from tax4 Please bear in mind that, "being a non-stock and/or non-profit corporation does 4. Thus, "statutes

granting tax exemptions are construed strictissimi juris against the taxpayer and

liberally in favor of the taxing authority. A claim of tax exemption must be clearly

shown and based on language in law too plain to be mistaken. Otherwise stated, taxation

is the rule, exemption is the exception. The burden of proofrests upon the party claiming

the exemption to prove that it is in fact covered by the exemption so claimed5. (BIR

Ruling No. 466-2014 dated November 19, 2014)

In view of the foregoing, the request of BMS CHRISTIAN INSTITUTE, INC. to

be exempted from income tax on its income as a Section 30(H) institution is hereby

denied as it failed to prove that it is a non-profit corporation. Therefore BMS CHRISTIAN INSTITUTE,INC. shall be treatedas an ordinary corporation subject to

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

5Quezon City and The City Treasurer of Quezon City vs. ABS-CBN Broadcasting Corporation [G.R.No. 166408, 6 October 2008]. 4 Ibid.

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revenue taxes imposed by the National Internal Revenue Code of 1997, as amended. thirty percent (30%) income tax rate pursuant to Section 27 (A) and other internal

Please be guided accordingly.

Very truly yours.

Commissioner of Internal Revenue CAESAR R. DULAY Mac

-036589 A

CC: Revenue Region No. 2

Attention: Revenue District Office No. 13 - Tuguegarao City

Philippine Council for NGO Certification 6th Floor SCC Bldg., CFA-MA Cmpd.. 4427 Interior old Sta. Mesa 1013 Manila

K-1 /spf18-1346