RMC No. 76-2003: Clarifies the tax exemptions of non-stock, non-profit corporations and non-stock, non-profit educational institutions

Key points

1. Non-stock, non-profit organizations. Those listed under Section 30 of the Tax Code of 1997 are exempt from income tax on income received as such organizations. Income from their properties, real or personal, or from any activity conducted for profit, such as rent from their building or premises, is taxable and must be returned for taxation.
2. Final withholding tax on their investment income. Their interest from currency bank deposits, yield from deposit substitutes, trust funds and similar arrangements, and royalties from Philippine sources are subject to 20% final withholding tax. Interest from a depository bank under the expanded foreign currency deposit system is subject to 7 1/2% final withholding tax.
3. Educational institutions: income and VAT. Their exemption covers national internal revenue taxes on revenues and assets used actually, directly and exclusively for educational purposes. Cafeteria, canteen and bookstore revenues are exempt if the school owns and operates them as ancillary activities within school premises. Private educational institutions accredited by the Department of Education, Culture and Sports or the Commission on Higher Education are exempt from VAT, but not on other sales of goods and services.
4. Unrelated income and bank interest. Educational institutions pay internal revenue taxes on income from trade, business or other activity not related to their educational purposes. Unlike non-stock, non-profit corporations, their interest from currency bank deposits and yield from deposit substitutes used actually, directly and exclusively for educational purposes is exempt from the 20% final tax and the 7 1/2% tax under Section 27(D)(1). They must annually submit to the Revenue District Office an annual information return and duly audited financial statement, with the documents specified in the Circular.
5. Registration fee and receipts. Both kinds of organizations pay the annual registration fee of P 500.00. They must issue duly registered receipts or sales or commercial invoices for each sale or transfer of merchandise or service not directly related to the activities for which they are registered.

Who is affected

• Non-stock, non-profit corporations under Section 30 of the Tax Code of 1997
• Non-stock, non-profit educational institutions

Deadlines and effectivity

• Annual submission of the information return and audited financial statement