Tan Yan Kee Foundation

September 10, 2009 BIR RULING [DA-(DT-050) 526-09] E.O. 720 Tan Yan Kee Foundation 7/F Allied Bank Center 6754 Ayala Avenue Makati City Attention: Ms. Juanita Tan Lee Corporate Secretary and Assistant Treasurer Gentlemen : This refers to your letter dated April 1, 2009, requesting for clarification on whether Allied Banking Corporation's ("Allied Bank", for brevity) cash donation to TAN YAN KEE FOUNDATION, INC. be accorded full deductibility as business expense or on a limited deductibility status, taking into consideration the provisions under Executive Order No. 671 vis-a-vis the provisions of Executive Order No. 720, amending the former, and in relation to Revenue Memorandum Circular (RMC) No. 14-08. Based on your representations, as well as from the documents submitted, the facts are as follows: 1. Allied Bank on two (2) occasions donated cash in the amounts of P7,498,091.39 (dated August 20, 2008) and P5,000,000 (dated March 25, 2008) as per Certificate of Donation Nos. DO 47-003-2008 and DO 47-004-2008, respectively, to Tan Yan Kee Foundation, Inc., ("Tan Yan Kee", for brevity) a non-stock, non-profit organization, registered with the Securities and Exchange Commission (SEC) and duly accredited by the Philippine Council for NGO Certification (PCNC) as a qualified donee institution. HScaCT 2. Subsequently, Allied Bank is claiming the aforesaid donations as 100% business expense deduction pursuant to Section 34 (H) of the Tax Code of 1997, as amended, since a Certificate of Registration as a donee institution was issued to Tan Yan Kee by the BIR on May 31, 2005 and the same shall be valid for five (5) years or until May 31, 2010. 3. Prior to the issuance of Executive Order (EO) No. 671 on October 22, 2007, PCNC is the BIR's designated accrediting arm for NGO's accreditation/qualification as donee institution. However, upon the effectivity of EO 671, appropriate government agencies are designated to be the accrediting entities that will certify and accredit NGOs as donee-institutions. 4. Due to the effectivity of EO No. 671, RMC No. 14-2008 dated January 22, 2008 was issued by the BIR advising that the Certificates of Accreditation issued by the PCNC as of November 15, 2007 are still valid until March 31, 2008 and further directed the holders of such certificates to renew their accreditation with the proper accrediting government entity on or before March 31, 2008. 5. Thereafter, EO No. 720 dated April 11, 2008 was promulgated modifying EO No. 671 to the effect that the PCNC shall be the government's partner in a system of accreditation to determine the qualification of domestic corporations or associations or NGOs for accreditation as donee institutions, provided that no accreditation shall be processed by the PCNC unless the NGOs has secured a valid registration with the government agency that exercises regulatory function over such corporation, association or NGO. SaCIDT In reply, please be informed that EO No. 720 modified EO No. 671, in the sense that the PCNC was designated to be the partner of the government in promoting transparency and accountability in evaluating, accrediting and monitoring donee institutions, being direct beneficiaries of contributions from donor institutions or individuals. Hence, by virtue of EO 720, PCNC has been designated to establish and operationalize a system of accreditation among donee institutions and recommends its registration to the BIR as a qualified donee institution and was further tasked to continue to process requests for accreditation from prospective donee institutions, without prejudice to the review and approval thereof by the appropriate government agencies under existing laws, rules and regulations. Furthermore, Section 6 of EO No. 720 provides that "all corporations, associations, NGOs that have been granted qualified donee institution status, prior to the issuance of this Executive Order, shall remain as Qualified Donee Institution until its expiration as stated in their respective Certificate of Registration". Therefore, donee institution status of all NGOs/non-stock, non-profit corporations certified by PCNC and registered by the BIR as qualified donee institutions prior to November 15, 2007 shall be valid until the expiry date indicated in their respective Certificates of Registration without prejudice to the review and approval thereof by the proper accrediting government entity. In view of the said Section 6 of EO No. 720, it appears that the Certificate as a donee institution of Tan Yan Kee remains valid because the same was issued on May 31, 2005 and valid until five (5) years thereafter, which is until May 31, 2010. IN VIEW of the ABOVE, it is the opinion of this Office and so holds that inasmuch as Section 7 of EO 720 expressly repealed EO 671, its executive orders and administrative issuances inconsistent with it, and further restoring back the power and duties of the PCNC in the accreditation of qualified donee status of subject corporations, it follows that the prior accreditation of TAN YAN KEE as a qualified donee institution which was then issued by PCNC, prior to the issuance of EO 671 remains valid until its expiration date (May 31, 2010) as previously granted by PCNC. IaHSCc Accordingly, the cash donations made by Allied Bank in favor of TAN YAN KEE could rightfully be claimed by Allied Bank as 100% deductible as business expense. 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. (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service