Should Churches Pay Taxes?

Well, to burst your bubble, churches DO pay taxes.

Under Section 4(3), Article XIV of the Constitution, it is stated that charitable institutions, churches and parsonages or convents appurtenant thereto, mosques, non-profit cemeteries, and all lands, buildings, and improvements, actually, directly and exclusively used for religious, charitable, or educational purposes shall be exempt from taxation.

It also states that;

“(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.”

However, that doesn’t mean that non-stock, non-profit organizations like the churches are absolutely exempted from taxes.

In a Supreme Court court decision (Lladoc vs. Commissioner of Internal Revenue, 14 SCRA 292), it was held that the tax exemption of charitable and religious institutions under the Constitution refers only to real property exemption and not to other types of taxes.

This is supported by the Real Property Tax Code which states;

Sec.  40. Exemptions from Real Property Tax.

(c) Charitable institutions, churches, personages or convents appurtenant thereto, mosques, and all land, buildings, and improvements actually, directly and exclusively used for religious or charitable purposes.

But again, the tax exemption of churches do not cover all types of income and activities. Income from properties and activities conducted for profit by non-stock, non-profit corporations is subject to income tax.(Sec. 30, Tax Code)

Which means, income earned by a church from the sale or lease of its real property is actually subject to tax. Interest income from bank deposits and other types of investments are likewise subject to the final withholding taxes.

Schools or educational institutions under the care of churches that invest in stocks is also subject to income tax.

Caleruega Church in Tagaytay

What About The Donations? Shouldn’t Those Be Taxed As Well?

Let’s do our assignments once more.

The National Internal Revenue Code states that donations to churches shall be tax exempt.

Another issue in favor of exempting church collections is the donor’s tax floor which states that donations amounting Php100,000 and below is exempt. Visit the Donor’s Tax section of the BIR website to see the matrix.

Where Do Our Church Donations Go?

Before we talk too much about how corrupt the churches are, take a look at the following costs that church administrators have to take care of out of the few pesos and centavos you are contributing when attending worship services or Masses.

1) Repairs and maintenance of Church structures.
2) Church maintenance: electricity, gas, cost of light bulbs, cost of cleaning services (janitor), cleaning materials, routine painting, etc., new roof about every 15 years or so., routine plumbing, carpet cleaning/replacement.
3) Lawn and gardening services.
4) Fire insurance, legal insurance, health insurance for staff.
5) Parking lot maintenance and repair; rental of land on which lot is located if not owned.
6) Construction, new additions or building, if congregation grows too large for existing structure
7) Staff salaries: pastor/priest, secretary, asst pastors, deacons, choir/music director, altar knights, catechists, counselors.
8) Materials for study classes: Bibles, books on theology, etc. for catechism classes, marriage seminars, etc.
9) Music pieces, organs, guitar, pianos, sound systems, amplifiers, microphones, speakers, etc.
10) Costs of celebrations such as Christmas, Easter, Communion, Confirmations
11) Office supplies/mailing: office space and furniture, paper supplies, etc. and mailings to the congregation and other institutions.
12.) Renewals of yearly licensing as a church (non and other legal costs of maintaining a non-profit religious institution.
13) Charity projects, youth groups, aid to foreign missions, etc.
14) And a whole lot of other stuff you don’t see being done by church workers.

So before you say anything against your church or religious organization, whether it’s Catholic, Evangelical, INC, Islam, Buddhism, check yourself first.

Maybe you’re the one who’s not paying the right taxes.

Know more about basic taxation and how churches are run (really) by subscribing to BurnGutierrez.Com for FREE.

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Photo credit: Yla Corotan