Amending Certain Sections Of The National Internal Revenue Code Governing Educational Institutions

Case Overview and Summary

Summary of Presidential Decree No. 305

Tax on Educational Institutions:
- Private educational institutions, whether stock or non-stock, shall pay a tax of 10% on their taxable net income from school operations, related activities, and passive investment income such as interest, dividends, royalties, etc. (Section 24)
- Dividends received by private educational institutions from domestic or resident foreign corporations are subject to partial exclusion of intercorporate dividends under Section 29(c). (Section 24)

Exemptions from Tax:
- Corporations or associations organized and operated exclusively for religious, charitable, scientific, athletic, or cultural purposes, or for the rehabilitation of veterans, are exempt from tax, provided no part of the net income benefits any private stockholder or individual. (Section 27(e))
- However, income from any of their properties or activities conducted for profit, regardless of the disposition of such income, is subject to tax. (Section 27(e))

Deductions for Private Educational Institutions:
- In addition to regular business expenses, private educational institutions are allowed to deduct expenses incurred for the expansion of school facilities, as determined by rules and regulations issued jointly by the Departments of Education and Culture and Finance. (Section 30(a)(4))

Effective Date:
- This Decree takes effect beginning the calendar year 1974 and fiscal year beginning July 1, 1974.