BIR Ruling [DA-140-01]

August 28, 2001 BIR RULING [DA-140-01] Philippine Council for NGO Certification 4/F 4718 Eduque St. Makati City Attention: Ms. Fely I. Soledad Executive Director M a d a m : This refers to your letter dated October 3; 2000 and follow-up letter dated March 19, 2001 requesting for opinion on whether or not an international organization with home office based abroad is qualified to be granted donee institution status. Specifically, you are referring to Helen Keller International, Inc. which has applied for certification with PCNC but its board members are based overseas, hence fundamental issues regarding governance cannot be fully addressed by your evaluation process. In reply, please be informed that Sec. 34 (H) of the Tax Code provides, viz: "(H) Charitable and Other Contributions. (I) In General. Contributions or gifts actually paid or made within the taxable year to, or for the use of the Government of the Philippines or any of its agencies or any political subdivision thereof exclusively for public purposes, or to accredited domestic corporations or associations organized and operated exclusively for religious, charitable, scientific, youth and sports development, cultural or educational purposes or for the rehabilitation of veterans, or to social welfare institutions, or to non-government organizations, in accordance with rules and regulations promulgated by the Secretary of Finance, upon recommendation of the Commissioner, no part of the net income of which inures to the benefit of any private stockholder or individual in an amount not in excess of ten percent (10%) in the case of an individual, and five percent (5%) in the case of a corporation, of the taxpayer's taxable income derived from trade, business or profession as computed without the benefit of this and the following subparagraphs". "xxx xxx xxx" Sec. 34(H)(1) of the tax Code of 1997 specifically mentions "accredited domestic corporations or associations" and "non-government organizations". On the other hand, subparagraph (2)(c) of the same Section of the Tax Code defines a " non-government organization" to mean a non-profit domestic corporation. In implementing Sec. 34(H) of the Tax Code, Rev. Regs. No. 13-98 was issued and in relation to the type of entities that may be accredited, provides as follows: SEC. 1. Definition of Terms . For purposes of these Regulations, the terms herein enumerated shall have the following meanings: a) "Non-stock, non-profit corporation or organization" shall refer to a corporation or association/organization referred to under Section 30 (E) and (G) of the Tax Code created or organized under Philippine laws exclusively for one or more of the following purposes: xxx xxx xxx b) " Non-government Organization (NGO)" shall refer to a non-stock, non-profit domestic corporation or organization as defined under Section 34(H)(2)(c) of the Tax Code organized and operated exclusively . . ." Considering the requirements of the Tax Code of 1997 and Rev. Regs. No. 13-98 that a non-stock, non-profit corporation or organization must be created or organized under Philippine laws and that an NGO must be a non-profit domestic corporation, this Office is of the opinion that a foreign corporation , like Hellen Keller International, Inc ., whether resident or non-resident, cannot be accredited as donee institution. (BIR Ruling No. 019-2001 dated May 10, 2001). Very truly yours, (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner Legal and Inspection Group