• The Bureau of Internal Revenue is looking into the taxability of establishments within tax-free schools
  • Under the law, establishments can only be tax-free if its income are from “actually, directly and exclusively for educational purposes”
  • Added businesses within tax-free schools should be owned, operated and located within the premises

The Bureau of Internal Revenue (BIR) is looking into the possible taxability of establishments such as dormitories, canteens, bookstores that are within a nonstock and nonprofit schools premises.

In a memorandum, BIR Commissioner Caesar R. Dulay was quoted by Manila Bulletin explaining that that educational institutions are exempted from tax if its income are “actually, directly and exclusively for educational purposes.”

If not, the income of these establishments are still subject to percentage of value-added taxes. To avail of the tax-exempt privileges, these additional businesses must be “operated, owned and located within the premises of the nonstock and nonprofit educational institutions.”

Commissioner Dulay further added that they have received reports that tax-free school often allow outsiders to have various businesses such bookstores, dormitories within their premises.

He explained that this initiative is in line with BIR’s tax compliance verification drive (TCVD) to improve tax compliance and hopefully increase tax base for 2018.