BIR Ruling [DA-118-05]

April 6, 2005 BIR RULING [DA-118-05] Section 101 (B) (2) BIR Ruling No. 064-98 Fr. Ruby A. Tagaro, SVD Manobo Development Center Saenganan, Consuelo Bunawan, Agusan del Sur Dear Father Tagaro : This refers to your letter dated January 5, 2004 requesting for tax exemption on charitable contributions from abroad. It is represented that you are a missionary to the indigenous people in the SVD area of Agusan Del Sur; that you are appointed by the SVD Southern Province as Coordinator of the SVD Tribal Filipino Apostolate (SVD TFA);that the SVD TFA had put up a formation and education technical training center for the out of school youth indigenous Manobo called Manobo Development Center (MDC),located at Saenganan, Consuelo, Bunawan, Agusan Del Sur; that at present MDC accepts male Manobo, but with the coming of the SSpS Sisters, the center will start to accept female Manobo for training; that MDC is an institution of formation and education providing technical skills; that this is a church initiated program and is assisted by the Department of Science and Technology (DOST) which provides training and equipment; that MDC has been existing for seven years; that it accepts out of school indigenous youth (stay-in/live-in) without demands for any financial obligations coming from their parents; that most of them come from very poor families that live in a hand-to-mouth existence; that this situation discourages the youth to go to school and pursue higher education; that the Apostolate through the MDC program is offering technical courses like arc and gas welding, automotive, farm mechanic, metal fabrications, etc. to the indigenous youth for free with board and lodging; that food and clothing are solicited from various generous people; that solicitation is becoming difficult nowadays; that the apostolate appealed for help from outside the country to support your program; and that MISEREOR, a German agency, approved your request and notified you that they are willing to help your program. In reply, please be informed that inasmuch as the donee is a religious and charitable institution, the aforementioned donation is exempt from the payment of the donor's tax pursuant to Section 101(B)(2) of the Tax Code of 1997, subject to the condition that not more than 30% of said gift shall be used by the donee for administration purposes (BIR Ruling No. 064-98 dated May 21, 1998). Moreover, Section 4.101-1 of Revenue Regulations No. 7-95 provides that "the VAT is imposed on goods and properties brought into the Philippines, whether for use in business or not. The tax shall be based on the total value, used by the Bureau of Customs in determining tariff and customs duties, plus customs duties, excise tax, if any, and other charges prior to the release of the goods or properties from customs custody such as postage, commissions, and other similar charges. . . " (VAT Ruling No. 057-98 dated November 18, 1998). Accordingly, any donation in the form of goods/properties shipped from abroad intended for the beneficiaries of your charitable institution is subject to value-added tax. ETDAaC However, for purposes of exemption from donor's tax in the case of resident donors, MDC must first be accredited with the Philippine Council for NGO Certification, Inc. (PCNC) which has been duly designated by the Secretary of Finance as the Accrediting Entity pursuant to Memorandum of Agreement dated January 29, 1998 executed by and between the Secretary of Finance and PCNC's Interim Chairman. For further inquiries on the certification process, you may contact PCNC at 6/F, SCC Building, CFA-MA Compound, 4427 Interior Old Sta. Mesa, 1016 Manila or call their office at 715-9594, 715-2756, 715-2783, and 782-1568. You may also visit their website: http://www.pcnc.com.ph or e-mail them at [emailprotected]. 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 as null and void. Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group