November 14, 1988

BIR RULING NO. 539-88

24 169-88 539-88

Gentlemen :

This refers to your letter dated March 2, 1988 requesting exemption from the 10% tax
on your income as a private educational institution prescribed under Section 24(a) of the Tax
Code, as amended by Executive Order No. 37; the 20% tax on your interest and/or yield on
deposit substitute instruments and interest on your savings and time deposits; the customs
duties and the compensating tax on your importation of books and other educational
materials and equipment to be actually, directly and exclusively used for your educational
purposes.
In reply thereto, I have the honor to inform you that par. 3, Sec. 4, Art. XIV of the 1987
Constitution provides, viz:
"(3) 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 . . ."

The aforementioned Constitution was ratified at a plebiscite held for the purpose on
February 2, 1987. Accordingly, the tax exemption privilege of non-stock, non-profit educational
institutions took effect as of said date.
Such being the case, the University of Santo Tomas being a non-stock, non-profit
educational institution is exempt from taxes e.g., 10% tax on its income as an educational
institution; 20% withholding tax on its interest income and/or yield on deposit substitute
instruments and interest on its savings and time deposits; customs duties and value-added
tax on its importation of books and other educational materials and equipment to be actually,
directly and exclusively used for educational purposes.
It is hereby understood that the tax exemption granted herein under the above-
quoted constitutional provision does not include the income derived from the operations of
the UST Hospital which is owned by you. Said hospital is still subject to internal revenue tax in
the absence of a showing that the same is entitled to tax exemption. cdtai

Very truly yours,

(SGD.) BIENVENIDO A. TAN, JR.

Commissioner

(10% Tax on Income of UST as a Private Educational Institution, BIR Ruling No. 539-88, [November 14,
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1988])