BIR Ruling [DA-321-06]

May 17, 2006 BIR RULING [DA-321-06] Sections 34 (H) (2) & 101 (A) (2); BIR Ruling No. DA-086-05 Ms. Liduvina Bakunawa 78-A Maryland St. Cubao, Quezon City M a d a m : This refers to your letter dated March 28, 2006 requesting for confirmation of your opinion that the donation of artworks by your sponsor to the Philippine Government is not subject to donor's tax and deductible from the gross income of said sponsor. caIACE As represented, in line with the government's thrust of preserving our cultural heritage, your group is working on the donation of artworks of the late National Artist Juan C. Flores through a prospective sponsor who will purchase said artworks and donate the same to Malacaang Museum. In reply, please be informed that under Section 34(H)(2) of the Tax Code of 1997, donations to the Government, its agencies or political subdivisions is deductible in full from the gross income of the donor. However, donations not in accordance with the National Priority Plan is subject to limited deductibility or deductions to an amount not exceeding 10% in the case of an individual and 5% in the case of a corporation of the taxpayer's taxable net income as computed without the benefit of this deduction, viz: "(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" In addition, the assistance made by the donor is exempt from payment of donor's tax pursuant to Sections 101(A)(2) and (B)(1) of the Tax Code of 1997. IScaAE In view of the foregoing, the amount of donation is deductible in full from the gross income of the donor-sponsor and exempt from the payment of donor's tax pursuant to Sections 34(H)(2) and 101(A)(2), respectively, both of the Tax Code of 1997. However, for purposes of entitlement to the full deductibility of the contribution/donation from gross income of the donor under Section 34(H) of the Tax Code of 1997, a certification must be secured from the NEDA that the above contribution/donation to the Government through the Malacaang Museum is in accordance with priority programs, projects and activities included in the current National Priority Plan. 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 as null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service