BIR Ruling [DA-318-97]

September 16, 1997 BIR RULING [DA-318-97] Angara Abello Concepcion Regala & Cruz ACCRA Building, 122 Gamboa Street Legaspi Village, Makati City Attention: Attys. Aleli Angela G. Quirino J. Alessandra G. Cosico and Angela C. Ylagan Gentlemen : This refers to your request on behalf of your client, Philippine Ballet Theatre, Inc. , for registration as donee institution under Section 29 (h) (2) (C) of the Tax Code, as amended by Batas Pambansa Blg. 45, and implemented by BIR-NEDA Regulations No. 1-81, as amended by BIR-NEDA Regulations No. 1-82. Documentary evidence submitted disclosed that the Philippine Ballet Theatre, Inc. (Foundation) is a non-stock, non-profit domestic corporation, organized and duly registered with the Securities and Exchange Commission under SEC Registration No. 136900 dated December 5, 1986 with the following purpose, among others, to wit: "1. To establish or create an institutionalized medium which shall carry on and engage in the establishment and maintenance of a professional ballet or dance company; arouse and promote general interest in acceptance of and appreciation for the ballet art by way of public presentation of ballet or dance performances throughout the country; cultivate and develop the talents and skills of Filipino dancers, choreographers, musicians and other artists in related fields to the end that they would make a career out of it and thus open up the exploitation and promotion of the indigenous cultural wealth of the Filipinos given expression in classic and other forms of dance; induce and encourage Filipino artists in ballet who are abroad to come back to the Philippines and perform for their own people; and foster and develop Philippine art and culture in the field of dance and related arts through engagements for public performance, workshops, seminars, exhibition and the likes in the Philippines and in other parts of the world; TSIDaH "2. To relate with Government cultural activities and to accept grants and subsidies from non-governmental and government bodies; xxx xxx xxx" In reply, please be informed that as a corporation organized and operated for cultural purposes, donations in favor of the Foundation are exempt from the payment of donor's tax pursuant to Section 94 (a) (3) of the Tax Code, as amended, subject to the condition that not more than 30% of the said gifts shall be used by the donee, Philippine Ballet Theatre, Inc., for administration purposes. TaCDAH On the other hand, Section 29 (h) (2) (c) of the Tax Code, as amended by Batas Pambansa Blg. 45, as implemented by BIR-NEDA Regulations No. 1-81, as amended by Revenue Regulations No. 1-82 and 10-82 provides that donations to a private foundation, which means a non-profit domestic corporation or association organized and operated exclusively for scientific, research, educational, character building and youth and sports development, health, social welfare, cultural or charitable purposes or a combination thereof, no part of the net income of which inures to the benefit of any private individual shall be deductible in full from the taxable business income of the donor. Under Section 29 of the Tax Code, as amended by Republic Act No. 7496 (An Act Adopting the Simplified Net Income Taxation Scheme [SNITS] for the Self-Employed and Professionals Engaged in the Practice of Their Profession), and as implemented by Revenue Regulations No. 2-93, effective July 28, 1992, individuals engaged in business or practice of profession shall be allowed as deduction from gross income, among others, contributions made to the Government and accredited relief organizations for the rehabilitation of calamity-stricken areas declared by the President. AcTDaH Pure compensation income earners are allowed to deduct from their gross compensation income only their personal and additional exemption. (Sec. 29, Tax Code) Such being the case, this Office is of the opinion as it hereby holds that for income tax purposes, contributions and donations in favor of the Philippine Ballet Theatre, Inc. by individual donors/contributors shall not be deductible from their gross income, and that since the Philippine Ballet Theatre, Inc. is a private foundation organized and operated for cultural purposes, contributions and donations in its favor by corporate donors shall be deductible in full from the gross income of the corporate donors/contributors. It should be understood that the said exempt organization/foundation shall be constituted as withholding agent for the government if it acts as an employer and its employees received compensation income subject to the withholding tax under Section 72 (a), Chapter 10, Title II of the NIRC as implemented by Revenue Regulations No. 6-82, as amended, or if it makes income payments to individuals or corporations subject to the expanded withholding tax pursuant to Section 50 (b) of the NIRC, as amended, and as implemented by Revenue Regulations No. 6-85, as amended. It is requested a copy of this letter of exemption be attached to the annual information return which you will file on or before April 15 of each year. (BIR Ruling No. 517-A-93 dated December 23, 1993) 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, the this ruling shall be considered null and void. Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV OIC, Assistant Commissioner (Legal Service)