BIR Ruling [DA-220-03]

July 9, 2003 BIR RULING [DA-220-03] 34 (H) DA-142-2002 Commission on Higher Education DAP Building, San Miguel Avenue Ortigas Center, Pasig City Attention: Ms. Evelyn V. Mojica Director, HEDFS Gentlemen : This refers to your letter dated March 4, 2003, requesting for a ruling as to whether or not donations, contributions and bequests received by the Commission on Higher Education (CHED) can be treated as allowable deduction for income tax purposes by the donor/contributors. It is represented that the Commission on Higher Education was created by virtue of Republic Act No. 7722, otherwise known as the "The Higher Education Act of 1994"; that Section 10 of the same Act specifically established the Higher Education Development Fund (HEDF); that Section 11(c) provides for the HEDF Secretariat; that the HEDF Secretariat is tasked to source out additional contributions/donations from private organizations and individuals and other government instrumentalities, both local and foreign to provide adequate developmental support to higher education institutions, programs and projects that will be responsive to the needs of the HE community and the regional/national development concerns of our country. In reply, please be informed that Sec. 15 of R.A. No. 7722 provides that: "SEC. 15. Tax Exemptions. Any donation, contribution, bequest, and grant which may be made to the Commission shall constitute as allowable deduction from the income of the donor for income tax purposes and shall be exempt from donor's tax, subject to such conditions as provided under the National Internal Revenue Code, as amended." In addition, Section 34(H) of the Tax Code of 1997 provides, viz.: Sec. 34. Deductions from Gross Income. xxx xxx xxx (H) Charitable and Other Contributions. (1) 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 nongovernment 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 (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. Said contributions are deductible in full pursuant to Sec. 34(H)(2)(a) of the same Tax Code which states that: xxx xxx xxx (2) Contributions Deductible in Full. Notwithstanding the provisions of the preceding subparagraph, donations to the following institutions or entities shall be deductible in full: (a) Donations to the Government. Donations to the Government of the Philippines or to any of its agencies or political subdivisions, including fully-owned government corporations, exclusively to finance, to provide for, or to be used in undertaking priority activities in education, health, youth and sports development, human settlements, science and culture, and in economic development according to a National Priority Plan determined by the National Economic and Development Authority (NEDA), in consultation with appropriate government agencies, including its regional development councils and private philanthropic persons and institutions: Provided, That any donation which is made to the Government or to any of its agencies, or political subdivisions not in accordance with the said annual priority plan shall be subject to the limitations prescribed in paragraph (1) of this Subsection" Therefore, any donation, contribution, bequest, and grant which may be made to the Commission shall be deductible in full from the income of the donor for income tax purposes, if said donation, contribution, bequest or grant is in accordance with the annual priority plan determined by the NEDA, otherwise the deduction shall be subject to the limitation provided in Section 34(H) of the Tax Code of 1997 which is, 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 said deduction. aEHTSc Moreover, the donation shall be exempt from the donor's tax pursuant to Section 101(A)(3) of the Tax Code of 1997, subject to the condition that not more than 30% of said gift shall be used for administration purposes. Furthermore, the Deed of Donation is not subject to the documentary stamp tax prescribed under Section 196 of the Tax Code of 1997, but only to the documentary stamp tax of P15.00 imposed under Section 188 of the same Tax Code. 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.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group