Eligibility for a BIR Certificate of Tax Exemption for Students in the Philippines
A practitioner‑oriented guide (updated July 2025)
1. What is the “Certificate of Tax Exemption” (CTE) for students?
In BIR practice the label “Certificate of Tax Exemption” is an umbrella term for several pieces of proof that a student’s income or allowance is excluded from, or exempt from, Philippine income tax. It normally takes one of three forms:
| Form | Who Issues | Typical Situation | Effect | Common BIR Form |
|---|---|---|---|---|
| BIR ruling / Certificate of Registration—Tax‑Exempt (“COR‑TE”) | BIR Large Taxpayers/Exempt Division | Scholarship foundations, NGOs or schools secure it once to show that cash stipends they pay are exempt under § 32(B)(7)(c) NIRC. | Establishes the institution’s tax‑exempt status and flows through to the student. | No standard number (letter‑ruling style) |
| BIR Form 2304 “Certificate of Income Payments Not Subjected to Withholding Tax” | The payor of the allowance (school, foundation, LGU, etc.) | Given every time a stipend or grant is released. | Confirms to the student (and to auditors/banks) that the amount is tax‑exempt. | 2304 |
| Employer CTE for Minimum Wage Earners (MWEs) | Employer of a working student | When a student‑employee’s wage ≤ statutory minimum wage. | Lets the student show zero income‑tax due; replaces Form 2316. | May be noted on Form 2316 as “Exempt – MWE” |
When people say “I need a BIR tax‑exemption certificate for a student,” they are usually referring to one of the above proofs, all grounded on the same legal rules.
2. Core Legal Bases
| Source | Key Points for Students |
|---|---|
| Constitution, Art. XIV § 2(2) | State shall “establish and maintain a system of scholarships, grants ‑ in‑aid and other incentives…”—constitutional policy foundation. |
| NIRC 1997 (as amended) | • § 32(B)(7)(c) – Exclusions: “Scholarships, study grants, or other similar aid” are excluded from gross income. • § 24(A)(2) – Compensation earned by a minimum‑wage earner is exempt. • § 78/§ 81 – Withholding rules hinge on whether the payment is exempt; if exempt, no withholding. |
| R.A. 9504 (2008) | First introduced the MWE income‑tax exemption. |
| R.A. 10963 (TRAIN, 2017) | Retained MWE exemption; raised 13ᵗʰ‑month/bonus exclusion to ₱90,000—frequently relevant to graduate assistants. |
| RR 10‑2008, RR 11‑2010, RR 2‑98 (as amended) | Implement details of scholarship and MWE exclusions. |
| RMC 32‑2019 & RMC 50‑2018 | FAQs and documentary checklists for scholarship foundations and employers. |
3. Who is Eligible?
Scholarship or Study‑Grant Recipients Any bona‑fide student—from basic education to postgraduate—who receives support that:
- Directly defrays educational cost or living expenses, and
- Comes from government, an educational institution, a duly registered foundation, or a private individual with no employment quid pro quo.
Working Students Classified as Minimum Wage Earners
- Employment must be within the Philippines.
- Daily basic pay does not exceed the regional minimum wage set by the Regional Tripartite Wages and Productivity Board.
- The moment the wage exceeds the minimum (overtime, commissions, etc.), the exemption is lost for that pay period only.
Apprentices/OJT Trainees under CHED, TESDA or DepEd programs
- Allowances that are purely training‑related (not compensation for productive work) remain within § 32(B)(7)(c).
Foreign‑Funded Exchange‑Program Grantees
- Living stipends remitted from abroad are non‑Philippine‑sourced and, even without § 32(B)(7)(c), already outside the scope of Philippine income tax; the CTE is still useful to avoid withholding by partner schools.
Not eligible: Regular employees on a fixed salary above minimum wage; student‑athletes whose allowances are tied to professional league participation; student organizations earning business income (they must obtain their own Section 30(H) exemption as non‑stock non‑profit educational institutions).
4. Documentary Requirements (2025 Checklist)
| Applicant | Must Present | Where Filed |
|---|---|---|
| Scholarship Foundation / School (to secure one‑time COR‑TE) | • SEC/DTI registration • Articles & By‑laws showing exclusively scholastic purpose • Board resolution approving scholarship program • Draft MOA with grantees • Previous financials (Audited FS) |
BIR Exempt Division or RDO where principal office is located |
| Student (to open bank acct / border clearance, etc.) | • Copy of payor’s COR‑TE or Form 2304 • Award/Grant letter • School ID & current registration • (If employed) Employment contract showing wage ≤ minimum • 1 valid government ID |
Shown to bank, CHED, or employer; not filed with BIR unless applying for TIN |
| Employer of Working Student (MWE) | • Payroll showing wage ≤ minimum • Student’s school registration (to show bona‑fide student status) |
Retain in audit file; issue CTE notation on Form 2316 |
5. Step‑by‑Step: Getting the Certificate
Determine the correct certificate.
- Scholarship payor without prior exemption? → Apply for COR‑TE.
- Recurring stipend release? → Issue/Request Form 2304.
- Student‑employee MWE? → Employer notes “EXEMPT – MWE” on payroll and furnishes the student a CTE.
Prepare the documents listed in the checklist.
File with the proper BIR office.
- For COR‑TE: secure an appointment at the Exempt Division or applicable RDO, submit the dossier, pay ₱100 certification fee plus ₱30 documentary stamp tax.
- Processing time: 15 ‑ 30 working days (longer if technical working group evaluation is needed).
Receive the signed certificate / ruling.
Use and safekeep.
- Grantors must attach the certificate to annual income‑tax returns (ITR) as supporting document.
- Students keep a copy for bank, visa, or employment clearances.
6. Scope & Limitations of the Exemption
| Situation | Tax Treatment | Need to Renew? |
|---|---|---|
| Pure scholarship stipend | Fully excluded; no withholding. | COR‑TE: every 3 years or upon amendment of purposes; Form 2304: each payout. |
| Working student exceeds minimum wage for a day | That day’s pay becomes taxable; employer must withhold. | No separate filing; reflected in regular payroll. |
| Honoraria for research assistantship | If required service is rendered, BIR treats it as compensation; taxable unless MWE threshold applies. | N/A |
| Prizes & awards (academic contests) | Excluded only if received from the same institution and directly related to scholastic achievement (Sec 32(B)(7)(c)); otherwise subject to 20 % final tax if > ₱10,000. | N/A |
7. Compliance Obligations of Grantors
- Annual Information Return (BIR Form 1604‑C or -E)—list of exempt payments.
- Summary List of Scholarship Payments (SLSP)—if required under RMC 32‑2019.
- Books & Records—separate fund accounting for grants to preserve exemption.
- Withholding‑Tax Audit Ready—retain COR‑TE copy and grantee profiles for five (5) years.
8. Jurisprudence & Administrative Rulings
| Citation | Gist |
|---|---|
| BIR Ruling DA‑606‑2006 | Confirmed that a private foundation’s cash assistance to underprivileged students is covered by § 32(B)(7)(c). |
| BIR Ruling 083‑2010 | Living allowances to medical residents classified as compensation income because services are rendered; not a scholarship. |
| CIR v. De La Salle University (CTA EB No. 1693, 2021) | Reiterated that the primary purpose test applies—income from activities unrelated to educational purpose may forfeit the institution’s exemption. |
| CIR v. St. Luke’s Medical Center (G.R. 203514, Sept 8 2014) | Though not about students, the Supreme Court clarified how mixed‑purpose entities lose income‑tax exemption—often cited by BIR when evaluating scholarship foundations. |
9. Practical Pitfalls
- Using the wrong form. Students sometimes request Form 2304 directly from BIR; it is the payor who issues it.
- Mixing grant and pay. If a scholarship requires mandatory work (e.g., 20 hours/week in the lab) the allowance morphs into taxable wages.
- Regional wage changes. An MWE exemption disappears overnight when a wage order raises the statutory minimum above the student’s fixed rate—update contracts yearly.
- Forgotten renewals. COR‑TEs lapse after change in corporate purpose or every three years; unrenewed certificates are disregarded on audit.
10. Frequently Asked Questions
Can an individual student apply directly for a COR‑TE? The BIR issues COR‑TEs to the payor, not to individual students. A student needs only the payor’s certificate or Form 2304.
Is the exemption automatic? No. While the law grants the exclusion, proof is needed. Without Form 2304 or MWE notation, examiners will assess withholding‑tax deficiencies.
Do graduate assistants with ₱18,000 monthly stipend qualify? Likely taxable; the stipend is tied to teaching/research service, and the amount exceeds the daily minimum‑wage equivalent.
Does the CTE cover value‑added tax (VAT) or percentage tax? No. The certificate applies only to income tax (and related withholding). VAT liability arises only when the payor sells goods/services, which typical scholarship foundations do not.
11. Conclusion & Compliance Tips
Identify the nature of the payment first. If it is a true scholarship or the student is a minimum‑wage earner, the exemption exists in law; the certificate is merely the documentary shield. Keep copies of Form 2304s, monitor wage orders, renew COR‑TEs on time, and segregate grant funds from operating income. Doing so ensures students enjoy their tax‑free benefits and payors sail through BIR audits.