BIR affirms tax exemption of non-stock, non-profit schools

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BIR affirms tax exemption of non-stock, non-profit schools

Cuts down requirements for the confirmation of schools' tax exemptions

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BIR tax exempt

Good news: the Bureau of Internal Revenue (BIR) is affirming the tax-exempt status of non-stock, non-profit schools.

At the same time, the BIR is cutting down the requirements for the confirmation of such tax exemptions in pursuance of President Rodrigo Duterte’s mandate to cut bureaucratic red tape, speed up processing of transactions, and ease the burden of taxpayers and others who transact business with government offices.

The BIR said it issued Revenue Memorandum Order (RMO) No. 44-2016 which “expressly reduces the number of requirements for the processing of applications for the issuance of a confirmatory ruling on the tax-exempt status of educational institutions from the previous number of 11 under RMO No. 20-2013 to six.”

Under RMO No. 44-2016, all non-stock, non-profit educational institutions shall only submit the following documentary requirements to have their application processed:

  1. Original copy of the application letter for issuance of tax exemption ruling;
  2. Certified true copy of the Certificate of Good Standing issued by the Securities and Exchange Commission;
  3. Original copy of the Certification under Oath of the Treasurer as to the amount of the income, compensation, salaries or any emoluments paid to its trustees, officers and other executive officers;
  4. Certified true copy of the Financial Statements of the corporation for the last three (3) years;
  5. 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); Provided, that if the government recognition/permit/accreditation to operate as an educational institution was issued five (5) years prior to the application for tax exemption, 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, non-profit educational institution is currently operating as such; and
  6. Original copy of the Certificate of utilization of annual revenues and assets by the Treasurer or his equivalent of the non-stock, non-profit educational institution.

The BIR said Tax Exemption Rulings or Certificates of Tax Exemption issued to non-stock, non-profit educational institutions will remain valid and effective, unless recalled for valid grounds.

“The said non-stock, non-profit corporations are not required to renew or revalidate the Tax exemption rulings previously issued to them. Under RMO No. 20-2013, the validity period is three years from the date of the effectivity specified in the ruling,” the BIR said.

This effectively overturns former BIR Commissioner Kim Henares who last February issued Revenue Memorandum Circular No. 24-2016 which reiterated a Department of Finance order in 1995 requiring non-stock, non-profit educational institutions to submit, on an annual basis, documents detailing the state of their finances.

Also under RMO No. 44-2016, non-stock, non-profit educational institutions with Tax Exemption Rulings or Certificates of Exemption issued prior to June 30, 2012 are required to apply for new tax exemption rulings to enable the BIR to update its records and ensure a better system of monitoring.




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