BIR Ruling [DA-523-05]

December 27, 2005 BIR RULING [DA-523-05] Section 101 (A) (3); BIR Ruling No. DA-058-04 Angara Abello Concepcion Regala & Cruz ACCRA Building 122 Gamboa Street Legaspi Village, Makati City Attention: Atty. Ruby Rose J. Yusi Gentlemen : This refers to your letter dated August 22, 2005 requesting on behalf of your client, ING Bank N.V. Manila Branch ( ING Bank ) for a confirmation of your opinion that ING Bank's initial contribution of PhP1,000,000 to ING Foundation Philippines, Inc . ( ING Foundation ) is exempt from donor's tax and is fully deductible from the gross income of ING Bank in accordance with Section 101(A)(3) of the Tax Code of 1997. As represented, ING Bank is a foreign banking institution duly licensed to establish and operate a branch office in the Philippines. ING Foundation, on the other hand, is a non-stock, non-profit foundation registered with the Securities and Exchange Commission (SEC) under SEC Registration No. CN200511218 dated June 30, 2005. It is currently in the process of securing its accreditation with the PCNC. Its primary purpose is "to create, maintain and act as a non-stock, non-profit foundation for the purpose of engaging in charitable activities including, but not limited to, extending relief and assistance to the poor, distressed and underprivileged sector of the Philippines in whatever manner possible . . . ." It also has the power to grant aid or assistance to other foundations dedicated to the same pursuits. Per its Modus Operandi as filed with the SEC, ING Foundation will focus its operation mainly to provide possible solutions to various societal problems of the Philippines (such as rendering aid to and ameliorating the living conditions of the poor, distressed, and underprivileged; preventing community deterioration; promoting educational, cultural, health-awareness and sports programs) through networking and cooperation with and providing of funds to certain non-governmental organizations accredited by the Philippine Council for NGO Certification (PCNC). The first project of ING Foundation is a tie-up with Habitat for Humanity Philippines Foundation Inc. for the development of a community in Baseco Compound, Tondo, Manila. DaECST In reply, please be informed that inasmuch as the donee is a charitable organization, the aforementioned donation is exempt from the payment of donor's tax pursuant to Section 101(A)(3) of the Tax Code of 1997, subject to the condition that not more than thirty percent (30%) of said gift shall be used for administration purposes. However, it is the opinion of this Office that for purposes of full deductibility from the taxable business income of your client as donor pursuant to Section 34(H)(2)(C) of the Tax Code of 1997, ING Foundation must first be accredited with the Philippine Council for NGO Certification (PCNC), Inc. which has been duly designated by the Secretary of Finance as the Accrediting Entity pursuant to Memorandum of Agreement dated January 29, 1998 executed by and between the Secretary of Finance and PCNC's Interim Chairman. Section 34(H)(2)(C) of the Tax Code of 1997 provides that donations to an accredited non-government organization (NGO), which means a non-profit domestic corporation or association organized and operated exclusively for religious, charitable, scientific, athletic, cultural, rehabilitation of veterans, social welfare 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 depending on the donee's compliance with the level of administrative expense and utilization requirements. Otherwise, it shall be entitled only to the limited deductions as provided for under Section 34(H)(1) of the same Tax Code. Donations, contributions or gifts actually paid or made within the taxable year to accredited NGOs shall be allowed full deductibility on the taxable year it was incurred pursuant to Section 34(H)(2)(C) of the Tax Code of 1997 (BIR Ruling No. DA-124-2004, April 20, 2004 and BIR Ruling No. S30-016-2004 dated May 6, 2004). 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, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service