A lot of people have been asking the question (and probably you have too) - "Are churches tax exempt?" As most of us know, the government generates funds or income from its subjects as a means of proportionate cost distribution via what we call "taxation”. The taxes earned are the driving fuel that pushes all the activities and programs of the government for the betterment of the society.
One of the constitutional limitations of taxation is the “free worship rule”. This limitation provides the citizens freedom to exercise their religion. According to Article VI Section 28(3) of the Philippine Constitution, taxation does not exercise its power on the properties and revenues of religious institutions such as offerings or tithes.
Are Churches Tax Exempt
The exemption from taxation of religious institutions does not extend to income from activities which are deemed proprietary in nature or activities that are not in relation to the exercise of religion. The properties are exempted from real property tax when it is exclusively for educational, charitable and religious activities. Non-stock corporations or associations as incorporated by the National Internal Revenue Code, Section 30(E) when organized and operated exclusively for scientific, athletic, cultural, charitable or religious purposes or for the rehabilitation of veterans, wherein no part of its net income or asset shall belong to or inure to the benefit of any member, organizer, officer or any specific person shall be exempted from income tax.
The exemption from income tax for certain non-stock corporations is not absolute. The Court of Appeals Case No. 8912, July 2017 elaborated that non-stock corporations shall continually satisfy the following requirements to enjoy immunity from taxation: (a) It was known as a non-stock corporation or association; (b) It is exclusively organized for charitable purposes; (c) Operated solely for such purposes; and (d) No part of its net income or asset shall belong to or inure to the benefit of any member, organizer, officer or any specific person. The income of churches and religious institutions is taxable if it is primarily engaged for profit-seeking undertakings.
Pursuant to Section 101(A)(3) donations or gifts made to charitable or religious institutions and churches shall be exempted from donor’s tax. Under the BIR Ruling Number DA – 212 – 02 this exemption is subject to the condition that not more than 30% of the gifts shall be used for administration purposes.
The equipment imported to the Philippines for purposes of religious and charitable activities shall be declared. Goods that were imported to the Philippines under “conditionally free importations” after complying with the formalities promulgated and prescribed by the regulations and Commissioner of Customs shall be exempted from import duties or taxes.