BIR Ruling

May 22, 1975 Messrs. Joaquin Cunanan & Co. Certified Public Accountants 8th Floor, Rufino Building 6784 Ayala Avenue, Makati, Rizal Gentlemen : This refers to your letter dated November 11, 1974 requesting information on whether gifts, bequests, donations and/or contributions to the National Government or to its instrumentalities and agencies directly involved in social welfare, cultural and charitable activities and to local governments are exempt from the donor's and estate taxes and, are deductible in full in computing the taxable net income of the donor, as provided in Presidential Decree No. 507. In reply, I have the honor to inform you that Presidential Decree No. 507, allows exemption from donor's and estate taxes as well as the deduction in full from the taxable net income of the donor only if the donation is made in favor of social welfare, cultural or charitable institutions, no part of the net income of which inures to the benefit of any of its members. Accordingly, said Decree cannot be cited as basis of exemption of gifts given to the National Government or any of its instrumentalities or Agencies even if the recipient agency is directly involved in social welfare, cultural and charitable activities. However, contributions to the National Government are deductible for income tax purposes to an amount not in excess of 6% in the case of an individual and 3% in the case of a corporation of the taxpayer's taxable net income. (Sec. 30(h), Tax Code). Moreover, gifts to the National Government are exempt from the gift tax (Sec. 122(a)(2), Tax Code) and that bequests to the National Government are deductible from the gross estate of the deceased in computing net estate for estate tax purposes. (Sec. 89(a)(3) Tax Code). Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue TAN-1601-593-5