BIR Ruling [DA-148-01]

September 3, 2001 BIR RULING [DA-148-01] MEMORANDUM FOR: Ms. Estelita C. Aguirre Deputy Commissioner (Resource Management Group) This refers to your Memorandum dated August 20, 2001 concerning the inquiries of the AWEGA Foundation, viz: 1. Whether an individual earning purely compensation income is qualified to be a donor; and 2. What are the requirements for a donation to fall under the Limited Deductibility Category? In reply, please be informed as follows: 1. An individual earning purely compensation income is not precluded from being a donor to any duly accredited non-stock, non-profit corporation or organization/NGO. However, for income tax purposes, contributions and donations in favor of an accredited foundation/NGO by individuals earning purely compensation shall not be deductible from their gross income. Under Section 34 of the 1997 Tax Code, taxpayers earning compensation income arising from personal services rendered under an employer-employee relationship are not allowed to claim from their gross income the deductions enumerated therein except that under subsection (M) thereof, i.e. premium payments on health and/or hospitalization insurance. 2. Under Section 34(H)(1) of the 1997 Tax Code, donations to accredited domestic corporations/NGOs would fall under the limited deductibility category if: a) the accredited foundation/NGO is organized and operated exclusively for religious, charitable, scientific, youth and sports development, cultural, educational, rehabilitation of veterans or social welfare purposes; and b) no part of the net income of which inures to the benefit of any private stockholder or individual. However, for donations, contributions or gifts to accredited NGOs to be fully deductible , all the conditions enumerated in Section 3(2) of Revenue Regulations No. 13-98 must be fully complied with by the donor/s. Those conditions are not required when the donor only wants to claim LIMITED DEDUCTIBILITY of his/her donation. It is hoped that we have sufficiently answered the questions. Respectfully submitted: (SGD.) MILAGROS V. REGALADO Asst. Commissioner, Legal Service