Religious stores covered by taxes, BIR says

MANILA, Philippines – Contrary to popular belief, religious stores run by the Catholic Church are already being taxed under the law, the Bureau of Internal Revenue clarified Thursday.

The BIR issued the statement after Lingayen-Dagupan Archbishop Socrates Villegas ordered the closure of religious stores under his diocese that are not registered with the BIR.

“What are exempted from tax are only those things or services which are in the performance of their ‘religious’ function,” BIR Commissioner Kim Jacinto-Henares said in a phone interview.

“That has been the law ever since,” she added.

Asked if a religious store under the church’s management is exempted, Henares said: “No. Is that a church? The only one exempted is the Church.”

Products sold by religious stores are levied a 12 percent value-added tax and should be part of their total income. The income, in turn, is also charged with income tax.

Under the Article IV, Section 28 of the Constitution, it was said that “charitable institutions, churches and parsonages or convents...mosques, non-profit cemeteries” are all exempted from tax.

Henares said a clearer exemption is stipulated under Section 30 (E) of the National Internal Revenue Code.

Under the section, any body or corporation “organized and operated exclusively” for religious purposes shall not be subjected to tax. “If a Church store is selling products, is that religious? No,” Henares said.

The BIR chief also said the same rule applies to priests. “If a priest endorses someone and earns from doing so, that is not earnings from his religious activity, hence, it will be taxed,” she said.