Abbott Laboratories

February 27, 2008 BIR RULING [DA-113-08] 104; 115-99 Abbott Laboratories 102 EDSA 1554 Mandaluyong City Attention: Atty. Olive Misa HR Director Gentlemen : This refers to your letter dated May 18, 2007 requesting for an opinion relative to the reportorial requirements that Clara Abbott Foundation (Foundation) needs to submit, on an annual basis, to the Bureau of Internal Revenue. Documents submitted disclosed that Clara Abbott Foundation is a not-for-profit organization organized and existing under the laws of the United States; that it provides financial assistance, college scholarship and financial education exclusively to Abbott Laboratories (Abbott) employees worldwide and are given free of charge; that the Foundation does not have any branch, office or any form of permanent establishment in the Philippines; that the grant/assistance being given by the Foundation is based on the request made by the local affiliate's employees; that the requests are examined, assessed and approved based on the criteria made by the Foundation; that after approval of the request, the grant/assistance is given through checks in the name of the employee and is sent directly to the local affiliate or distribution to local employees; that the eligibility for financial assistance are as follows: 1. Active employee of Abbott, its subsidiaries or joint ventures; Working a minimum of 20 hours per week; Enrolled in a health care plan, Abbott or other With eligibility starting one year from date of hire SEHaDI 2. Employee who is under a disability program sponsored by Abbott or the respective government 3. Retiree of Abbott or its subsidiaries 4. Surviving Spouse (until remarried) or minor child of an Abbott employee or retiree that the Clara Abbott Scholarship Program is available to: 1. dependent children (age 24 or younger as of the application deadline) of Abbott employees and retirees worldwide, based on financial need; 2. Employees must have at least one year of service as of the deadline date, or one year from the date of Abbott acquisition; and 3. Working at least 20 hours per week to qualify that the Eligibility Guidelines for financial education are as follows: 1. Applicants Applicants must be the college-eligible dependent child of an employee or retiree of Abbott. Stepchildren are eligible if they live in the same household with the Abbott employee or retiree. The applicant must have graduated from secondary school and plan to attend or enroll in a university-level program at a university; trade or vocational school and be 24 years of age or younger at the time of the application letter. 2. Employee Service In order for an employee's child(ren) to be eligible, an employee must have a minimum of one year of service as of the deadline date, or one year from date of Abbott acquisition, and be working at least 20 hours per week. Dependent children (age 24 or younger) of Abbott retirees (at least 50 years of age with at least 10 years of service) are also eligible to apply for a scholarship. Contract employees are not eligible. 3. Former Employees Former employees are not eligible and these applications should not be forwarded to the Clara Abbott Foundation aIcCTA that while the Foundation shares a close connection to Abbott and exists solely for Abbott employees and retirees, it is a not-for-profit organization managed and funded separately from Abbott; that the Foundation's programs are not an Abbott benefit and entitlement; and that information provided by the Foundation is kept confidential except as required by law. In reply, please be informed that a gift or donation is a voluntary transfer of property from one person to another without any consideration or compensation therefor. The term is used by law in its broadest term. Thus, the grants/financial assistance, college scholarship and financial education assistance given by the Foundation to Abbott employees or retirees can be considered gifts by the former to the latter. Pursuant to Section 98 of the Tax Code of 1997, a donor's tax shall be levied, assessed, collected and paid upon the transfer by any person, resident or non-resident, of the property by gift. The said tax shall apply whether the transfer is in trust or otherwise, whether the gift is direct or indirect and whether the property is real or personal, tangible or intangible. However, where the donor is a non-resident foreign corporation, its real or personal property so transferred which are situated outside the Philippines shall not be included as part of its gift pursuant to Section 104 of the same Code. The donor's tax is an excise tax on the transfer of property. It is not a tax on property which is the subject of the gift, although it is measured by the value of that property. It is a tax on the donor's privilege to give. In view thereof, and considering that the donor is a non-resident foreign corporation, and therefore beyond the jurisdiction of the Philippine government to tax, this Office is of the opinion as it hereby holds that the aforementioned donation in the form of grants/financial assistance, college scholarship and financial education assistance shall not be subject to any Philippine tax. In this connection, the donor is required to submit to this Office, a copy of the deed of donation covering the aforesaid grants/financial assistance, college scholarship and financial education assistance with the signature of the authorized representative of the non-resident corporation, notarial commission and signature of the Notary Public acknowledging the instrument of donation duly authenticated by the Philippine Consulate General of the donor's residence. (BIR Ruling No. 115-99 dated August 6, 1999) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service