BIR Ruling [DA-318-96]

August 21, 1996 BIR RULING [DA-318-96] Hospicio de San Jose Ayala Bridge, 1099 P.O. Box 1890, Manila Attention: Sr . Lilia A . Cuachon, DC Administrator Gentlemen : This refers to your letter dated August 8, 1996 requesting exemption from taxation of the German donations of dental facilities in your favor for your free dental clinic that serves your "Clientele" consisting of abandoned orphaned, neglected, handicapped or indigent children, persons with disabilities, elderlies and etc. Documents submitted, disclosed that the Hospicio de San Jose is a non-stock, non-profit charitable, benevolent and religious corporation organized and existing under the laws of the Philippines. In reply thereto, please be informed that pursuant to Section 94 (a)(3) and (b)(2) of the Tax Code, as amended, gifts or donations in favor of an educational and/or charitable, religious, cultural or social welfare corporation, institution, foundation, trust or philanthropic organization or research institution or organization are exempt from donor's tax provided, however, that not more than thirty per centum of said gifts shall be used by such donee for administration purposes. Accordingly, since the donee Hospicio de San Jose is a charitable and religious corporation, the aforementioned foreign donations are exempt from the payment of donor's tax pursuant to Section 94 (b)(2) of the Tax Code, as amended, subject to the condition that not than 30% of said gift shall be used by the donee for administration purposes. However, Section 103 of the Tax Code, as amended by Republic Act No. 7716 which enumerates the transactions and goods/articles exempt from the value-added tax (VAT) does not include importations of articles/goods consigned to charitable and religious organizations, like the Hospicio de San Jose. Accordingly, since the donated dental facilities and equipment will come from abroad, the importation thereof shall be subject to the 10% VAT 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, such tax to be paid by the importer prior to the release of such dental facilities and equipment from customs custody pursuant to Section 101 (a) of the Tax Code, as amended. (BIR Ruling No. 110-91 dated June 18, 1991; BIR Ruling No. 224-92 dated August 13, 1992; BIR Ruling No. 248-92 dated September 8, 1992). cdta Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service)