BIR RULING NO.

477-2013
December 19, 2013

FACTS:
 Marlow Navigation Training Center, Inc is a non-stock, non-profit educational institution duly
organized under Philippine laws. Its purpose is to provide in-house training to seafarers.
 Through its president, they requested the BIR for tax exemption under Sec.30(H) and value-added
tax (VAT) exemption under Sec.109(H) of the 1997 Tax Code.

ISSUE: WON Marlow Navigation Training Center as non-stock, non-profit educational institution must
be granted tax and VAT exemption.

RULING: YES, Marlow Navigation Training Center is granted tax and VAT exemption but with
prohibitions.

Par.3, Sec.4, Art.XIV of the 1987 Constitution provides that, “All revenues and assets of non-stock,
non-profit educational institutions used actually, directly and exclusively for educational purposes shall
be exempt from taxes and duties.” Likewise, non-stock and non-profit institution is exempted from tax
on corporation under Sec.30(H) of the 1997 Tax Code. The exemption refers to internal revenue taxes
imposed by the National Government on all revenues and assets of non-stock, non-profit educational
institutions used for educational purposes.

On the other hand, non-stock, non-profit educational institutions whose gross income from unrelated
trade, business or other activity does not exceed 50% of their total gross income derived from all
sources, shall pay 10% on their taxable income except those covered by Sec.27(D) of the Tax Code.
However, the same shall be subject to regular corporate income tax rate prescribed by law if their gross
income from unrelated trade, business or other activity exceeds 50%.

In this request, Marlow Navigation Training Center as a non-stock and non-profit educational institution
shall be exempt from the payment of taxes and duties on all its revenues and assets used actually,
directly and exclusively for educational purposes. Its gross receipts from operations are likewise
exempt from from VAT. However, it shall be subject to internal revenue taxes on income from trade,
business or other activity, the conduct of which is unrelated to the exercise or performance by such
educational institutions of their educational purposes or functions. Other activities involving sale of
goods and services not in connection with its primary purposes are also subject to 12% VAT imposed
under Secs.106 nd 108 of the Tax Code, as amended, or 3% percentage tax imposed under Sec.116 in
relation to Sec.109(V) of teh same Code if gross sales or receipts from such sale of goods and
services do not exceed P1,919,500 which tax payment may legitimately be passed on to buyers of
such goods and services. Hence, as long as Marlow Navigation Training Center wil not engage in the
regular conduct or pursuit of a commercial or economic activity, including transactions incidental
thereto, it will remain exempt from VAT