August 6, 2009

BIR RULING [DA-(DT-040) 442-09]

Sections 34 & 101; S30-54-97 & 54-98,

S30-096-99

Philsaga Mining Corporation

Duratrak Compound
J.P. Laurel Avenue
Bajada, Davao City

Attention: Mr. Samuel G. Afdal

President

Gentlemen :

This refers to your letter dated June 1, 2009 requesting for

confirmation of your following opinions:
a) Donations and contributions to Philsaga High School Foundation, Inc.
(PHSFI) are deductible in full from Philsaga Mining Corporation's
(PSMC) taxable income and exempted from payments of donor's
tax;
b) PHSFI is considered as accredited non-government organization
donee and need not be accredited with the Philippine Council for
NGO Certification (PCNC); AHCaES

c) Periodic cash donation/assistance to PHSFI is likewise deductible in

full from PSMC's taxable income; and
d) PSMC needs to serve a Notice of Donation to RDO No. 121 and PHSFI
to issue a Certificate of Donation.
As represented, you are on the final stage of documenting and
executing your donations to a school.
In reply, please be informed as follows:
a) Donation to educational institutions is exempt from the payment of
donor's tax pursuant to Section 101 (A) (3) of the Tax Code of 1997, as
amended subject to the condition that not more than thirty percent (30%) of
said gift shall be used by the donee for administration purposes.
However, this Office does not issue general exemption. A ruling is
issued on a per transaction and case to case basis. A taxpayer applying for
tax exemption has to submit supporting documents i.e., Deed of Donation,
Donor's Tax Return, Transfer Certificate of Title and Tax Declaration (if real
property), and Certificate of Accreditation issued by the PCNC together with
his/its letter-request in order for this Office to assess the transaction before it
can issue a ruling granting tax exemption. ScCDET

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 On the issue of deductibility of donations and contributions, Section 34
(H) (2) (C) of the Tax Code of 1997 provides that donations to an accredited
non-government organization (NGO), which means a non-profit domestic
corporation or association organized and operated exclusively for scientific,
research, educational, character building and youth and sports development,
health, social welfare, cultural or charitable purposes or a combination
thereof, no part of the net income of which inures to the benefit of any
private individual shall be deductible in full from the taxable business
income of the donor depending on the donee's compliance with the level of
administrative expense and utilization requirements. Otherwise, it shall be
entitled only to the limited deductions as provided for under Section 34 (H)
(1) of the same Tax Code. (BIR Ruling No. S-30-054-98 dated September 30,
1998)
Since PHSFI is a private foundation organized and operating for
educational purposes, contributions and donations by PSMC in its favor shall
be deductible in full from the gross income of corporate donors/contributors
depending on the donee's compliance with the level of administrative
expense and utilization requirements.
b) For purposes of deductibility of donations and contributions made by
PSMC to PHSFI under Section 34 (H) of the Tax Code, it is a prerequisite that
PSHSFI be accredited with the government entity concerned (i.e.,
Commission on Higher Education) and the PCNC pursuant to Executive Order
No. 720.
c) Provided that the donee is accredited with the government entity
concerned and the PCNC, periodic cash donation/assistance to PHSFI is
deductible in full from PSMC's taxable income.
d) Section 13 (C) of Revenue Regulations (Rev. Regs.) No. 2-2003
otherwise known as the "Consolidated Revenue Regulations on Estate Tax
and Donor's Tax Incorporating the Amendments Introduced by R.A. 8424, the
Tax Reform Act of 1997" provides, viz.: IcTCHD

"(C) Notice of donation by a donor engaged in business. — In

order to be exempt from donor's tax and claim full deduction of the
donation given to qualified donee institutions duly accredited by the
Philippine Council for NGO Certification, Inc. (PCNC), the donor
engaged in business shall give notice of donation on every donation
worth at least Fifty Thousand Pesos (P50,000) to the Revenue District
Office (RDO) which has jurisdiction over his place of business within
thirty (30) days after receipt of the qualified donee institution's duly
issued Certificate of Donation, which shall be attached to the said
Notice of Donation, stating that not more than thirty percent (30%) of
the said donation/gifts for the taxable year shall be used by such
accredited non-stock, non-profit corporation/NGO institution
(qualified-donee institution) for administration purposes pursuant to
the provisions of Section 101(A)(3) and (B) (2) of the Code."
In relation to the above regulations, Sections 5 and 6 of Rev. Regs. No.
13-98 implementing R.A. No. 8424 specifically, Section 34 (H) thereof
relative to the deductibility of contributions or gifts actually paid or made to
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 accredited donee institutions in computing taxable income, states that —
"SECTION 5. Certificate of Donations. — All accredited non-
stock, non-profit corporation/NGO are required to issue a certificate of
donation in such form as prescribed by the BIR, on every donation or
gift they receive. Such certificate shall be accomplished by the said
accredited non-stock, non-profit corporation/NGO in triplicate and
distributed within thirty (30) days after the receipt of the donation, as
follows:
(a) Original copy — Donor
(b) Duplicate copy — BIR
(c) Triplicate copy — Donee
SECTION 6. Notice of Donations. — The donor, on the other
hand, should give a notice for every donation worth over One Million
pesos (P1,000,000) to the Revenue District Officer where his place of
business is located within thirty (30) days after the receipt of the
Certificate of Donation attaching to the said notice the copy of the
Certificate of Donation issued to him by the accredited non-stock,
non-profit corporation/NGO."
It is clear from the foregoing the obligation of the PHSFI for every
donation or gift it receives is to issue in triplicate the proper COD within
thirty (30) days after the receipt of the donation. It should furnish the PSMC
and the RDO having jurisdiction over it (PHSFI) one copy each of the COD
and keep the last copy for itself. HEDaTA

On the part of the PSMC and for purposes of full deductibility from its
taxable business income, PSMC should notify within thirty (30) days from
receipt of the COD, the RDO where its place of business is located, of
donations worth Fifty Thousand Pesos (P50,000) which it made.
Please be guided accordingly.

Very truly yours,

Commissioner of Internal Revenue

By:

(SGD.) JAMES H. ROLDAN

Assistant Commissioner
Legal Service

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