BIR Ruling

October 9, 1970 Senator Sergio Osmea, Jr. Senate, Manila S i r : This refers to your letter dated September 30, 1970 requesting information as to what taxes are due, if any, on contributions ranging from P1.00 to P100.00 which will be solicited from the general public by the "Friends of Democracy," a group of civic spirited citizens, in order to finance your electoral protest now pending before the Presidential Electoral Tribunal. In reply thereto, I have the honor to inform you that gift taxes prescribed by Sections 108, 109 and 110 of the Tax Code apply whether the gift is direct or indirect. However, contributions or gifts made in favor of a non-profit educational and/or charitable corporation, institution, foundation, trust or philanthropic organization and/or research institution or organization and those made to or for the use of the National Government or any entity created by any of its agencies which is not conducted for profit, or to any political subdivision of the said Government are exempt from the payment of the donor's and donee's gift taxes. (Please see Sections 109, 110, and 112, N.I.R.C.) Since neither you nor the "Friends of Democracy" adverted to in your inquiry fall under the category of any of the abovementioned institutions and/or organizations, all contributions which are intended to support your electoral protest are subject to the donor's and donee's gift taxes. As the person for whose benefit the aforesaid contributions are made, you will be subject to the donee's gift tax on the aggregate sum of the net gifts or contributions received during the calendar year, the tax to be computed in accordance with Section 110 of the Tax Code as amended by Republic Act No. 6110. On the other hand, the contributors or donors will not be subject to any tax considering that the individual contribution does not exceed P1,000.00. (See Sec. 112(a)(2), N.I.R.C.). For income tax purposes, however, they will not be entitled to any deduction because their contributions are given to the aforesaid "Friends of Democracy" for your benefit, an individual, and not in favor of anyone of those domestic corporations specified in Section 30(h) of the Tax Code as amended by Republic Act No. 6110. Very truly yours, MISAEL P. VERA Commissioner of Internal Revenue