Huawei Technologies Phils., Inc.

July 10, 2008 BIR RULING [DA-(DT-002) 024-08] Section 101; BIR Ruling No. 064-98 Huawei Technologies Phils., Inc. Unit 5302, 53/F, PB Com Tower Ayala Ave., cor Rufino St. Salcedo Village, Makati City Attention: Ms. Jannette Pel Accounting Manager Gentlemen : This refers to your letters dated June 26, 2008 and July 2, 2008 requesting for exemption from the payment of donor's tax, under Section 101 (A) (3) of the Tax Code of 1997, as amended, on the cash donation by Huawei Technologies Phils., Inc. ("Huawei Phils." for brevity) in favor of the Sichuan Earthquake Relief Fund for the earthquake victims in Sichuan, China and a clarificatory ruling on whether the aforestated donation is deductible under Section 34 (H) (2) (b) of the same Code. cEaDTA As represented, Huawei Phils. is a domestic corporation with business address at Unit 5302, 53rd Floor, PB Com Tower, Ayala Ave., corner V.A. Rufino St., Makati City. It is a wholly owned subsidiary of Huawei Technologies Co., Ltd., a company registered pursuant to the Company Law of the People's Republic of China. On May 12, 2008, a 7.8-magnitude earthquake hit the south-western province of Sichuan leaving more than 32,400 dead, 220,100 injured and 4.8 million people homeless. Huawei Phils. employs several Chinese nationals who were concerned with the plight of those affected by the earthquake. Thus, on June 26, 2008, and in answer to the call of various international organizations to aid for humanitarian reasons the victims of the earthquake, Huawei Phils. executed a Deed of Donation whereby it made a cash donation in the amount of PhP1,300,000.00 to the Sichuan Earthquake Relief Fund through the facility of the Embassy of the People's Republic of China with address at Dasmarias Village, Makati City. The fund transferred through the aforesaid embassy is a conduit to the Red Cross Society of China, an internationally recognized organization and will be used specifically for the benefit of the victims of the earthquake. aTcSID In reply, please be informed that gifts in favor of an educational and/or charitable, religious, cultural or social welfare corporation, institution, accredited nongovernment organization, trust or philanthropic organization or research institution or organization is exempt from the payment of the donor's tax pursuant to Section 101 (A) (3) and (B) (2) of the Tax Code of 1997, subject to the condition that not more than 30% of said gift shall be used by the donee for administration purposes. Moreover, this Office ruled in BIR Ruling No. 064-98 dated May 21, 1998 that local and foreign donations, which include donations for disaster relief work shall be exempt from donor's tax pursuant to Section 101 of the Tax Code of 1997. Since the donee is a trust, the aforementioned cash donation for disaster relief work is exempt from the payment of donor's tax pursuant to Section 101 (A) (3) of the Tax Code of 1997, as amended. However, the Deed of Donation is subject to the documentary stamp tax of PhP15.00 on certification under Section 188 of the same Code (BIR Ruling No. DA-123-2001 dated July 18, 2001). DTAIaH On the issue of whether the above donation is deductible from the gross income of Huawei Phils., Section 34 (H) of the Tax Code of 1997, as amended, provides that "contributions or gifts actually paid or made within the taxable year to, or for the use of . . . associations organized and operated exclusively for religious, charitable, scientific, youth and sports development, cultural or educational purposes . . .," shall be deductible in an amount not exceeding five percent (5%) of the donor-corporation's taxable income derived from trade, business or profession as computed without the benefit of the aforesaid deduction. Considering that the cash donation shall be given to the Red Cross Society of China, an internationally recognized organization to be used exclusively for the benefit of the victims of the earthquake in Sichuan, China, the aforementioned donation is deductible from the gross income of Huawei Phils. subject to the above limitation. 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. DHTECc Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service