1.Is it income on the part of the institution? Yes but it is not subject to 
 tax [Sec.

32
(B)(3), NIRC] 


2.Is it subject to estate/donor’s tax? No, provided that not more than 30% 
 is
used for administration purposes. . (Section 87 and 101 of the Tax Code)



3.Can X deduct the amount of the donation from his gross income? It 
 depends.

a. If X were a compensation income earner, he cannot deduct. 
 Reason: There

are only 3 allowable kinds of deductions for compensation income
earners (personal exemptions, additional exemptions & premiums on
health/hospitalization insurance). Donations are not among them. 


b. If X were an individual engaged in trade or business, up to the extent of 10%

of the amount of taxable income may be deducted; 


c. If X were a corporation, up to the extent of 5% of the amount of taxable

income may be deducted 


1.Should NSNPEI decide to deposit in a bank the funds from tuition fees, rentals,
and the gift of P 500,000.00, thereby earning interest income of 2% per
annum, is the interest from bank deposit income and taxable?

a. Is it income? YES. 


b. IS IT TAXABLE? YES, last paragraph of Section 30 NIRC states that


 income of whatever kind and character from an activity conducted
for profit shall be subject to income tax; 


2.Real Estate Tax - Such institution is exempt from payment of RET (BASIS: LGC
and Constitution) Under the Local Government Code of 1991, real
properties actually, directly and exclusively used for educational, religious,
and charitable purpose shall be exempt from real property tax. 


3.Income from operating a canteen
 For the operation of a canteen inside the
 campus, the income therein being incidental to the operations of the
school is exempt; 


4.Income from bookstore
 Not subject to income tax since operation from
bookstore is an ancillary activity the conduct of which is carried out within
the school premises 


5.Income from dormitories
 Not subject to income tax provided the dormitory is
within the campus as the same is an ancillary activity. However, income
from dormitory located outside of school premises shall be subject to
income tax already. 


9. Income from concessionaires of the canteen and operators of the dormitory.

These are already subject to income tax and treated as income from an activity
conducted for profit pursuant to the last paragraph of Section 30, NIRC.

Revenue Memorandum Circular No. 76-03 provides that revenues derived from
assets used in the operation of cafeterias/canteens and bookstores are exempt
from taxation provided they are owned and operated by the educational
institution as ancillary services and the same are located within the school
premises. However, they shall be subject to internal revenue taxes on income
from trade, business or activity, the conduct of which is not related to the
exercise or performance by such institutions of their educational purposes or
functions ( ie. Rental payment from their building/premises).

The interest income from currency bank deposits and yield from deposit
substitutes instruments actually, directly, and exclusively in pursuance of their
purposes as an educational institution are exempt from the 20% final tax and 7
1⁄2 % tax on interest income under the expanded foreign currency deposit
system upon compliance of certain conditions;

JURISTS BAR REVIEW CENTERTM

D. PROPRIETARY EDUCATIONAL INSTITUTIONS 1. Income tax

General Rule: Proprietary Educational institutions are not exempt from tax unless
there is a law providing for an exemption. Sec 27(B) NIRC in relation to the
Constitution: If the income from unrelated trade/activity (ut/a)exceeds 50% of the total
income, it is treated as an ordinary corporation taxable at the rate of 30%. Otherwise, it is
subject to a preferential rate of 10%. NOTE: The exemption from income tax is not
absolute but dependent on the income from unrelated trade or activity.

a.