BIR Ruling

February 7, 1972 Sycip, Gorres, Velayo & Co. Certified Public Accountants P. O. Box 589, Manila Gentlemen : This refers to your letter dated March 5, 1970, on behalf of your client, Jorge B. Vargas Filipiniana Foundation, Inc., requesting that it be granted a certificate of exemption from the payment of income and gift taxes and from the duty of filing the required income and gift tax returns. It is represented that the Jorge B. Vargas Filipiniana Foundation, Inc. is a corporation duly organized and existing under and by virtue of the laws of the Philippines, which has been organized for scientific advancement and all its funds are dedicated to scientific pursuits within the purview of the provisions of Section 24 of Republic Act No. 2067, as amended by Republic Act No. 5589. In reply, I have the honor to inform you that in the case of a foundation created for scientific advancement as well as specific research and development projects, the funds contributed for its support and maintenance and its projects are exempt from tax, pursuant to Section 24 of Republic Act No. 2067, as amended by Republic Act No. 3589, which provides, vis.: "Sec. 24. The Board shall promote and, in its discretion, assist in the establishment of private foundations for scientific advancement as well as specific research and development projects by private individuals, firms and institutions. All funds contributed to the support and maintenance of such foundations and their projects as well as specific research and development projects undertaken by private individuals and educational institutions, shall be tax exempt and deductible from the donor's income tax returns, upon certification by the Board that such foundations and funds are dedicated to scientific pursuits. All income of whatever kind and character which such foundations may derived from any of their properties, real or personal, or from their investments shall also be tax exempt." In other words, in order to be tax-exempt, the funds contributed to the foundation as well as the income derive from its properties and disbursements thereof must be dedicated exclusively for scientific pursuits. In addition, the foundation should keep a record of all the contributions and donation received by it as well as the disposition made from such funds. (BIR Ruling No. 412, October 16, 1961). However, notwithstanding the fact that not all of the funds of the foundation are dedicated to scientific pursuits as shown by the amended articles of incorporation that only at least 51% of the gross income of the foundation shall be devoted to scientific pursuits, a certification was issued by the National Science Development Board to the effect that the Jorge B. Vargas Filipiniana Foundation, Inc. qualifies as a scientific foundation. In view thereof, this Office is of opinion as it hereby holds that the Jorge B. Vargas Filipiniana Foundation, Inc. is exempt from the gift and income taxes by virtue of Section 24 of Republic Act No. 2067, as amended by Republic Act No. 3589. Very truly yours, MISAEL P . VERA Commissioner of Internal Revenue