BIR Ruling No. 103-10

October 12, 2010 BIR RULING NO. 103-10 Sec. 34 (H); Sec. 101 Child Protection Unit Network Organization, Inc. Tropicana Apartment Hotel 1630 Guerrero St. Malate, Manila Attention: Dr. Bernadette J. Madrid, MD Executive Director Ms. Amelia R. Fernandez Board Secretary & Treasurer Gentlemen : This refers to your request on behalf of Child Protection Unit Network Organization, Inc. ("CPU Net" for brevity) for a ruling that donations made to it for the 7th International Society for the Prevention of Child Abuse and Neglect (ISPCAN) Asian Regional Conference are exempt from donor's tax and are deductible expenses in accordance with Sections 34 (H) and 101 (A) (3) of the National Internal Revenue Code of 1997, as amended. IASEca As represented, CPU Net is a non-stock, non-profit association registered with the Securities and Exchange Commission (SEC) under SEC Registration No. CN200300718 dated January 9, 2003. The purposes for which it was organized are as follows: "1. To provide support, training and resources to enable child protection practitioners and child protection units to achieve excellence in serving abused children and children-at-risk; 2. To be able to give and receive funding for the purposes of supporting child protection practitioners, child protection units and the child protection system as a whole; 3. To initiate, stimulate, support and conduct activities that will enhance attainment of the corporation's interests, goals and objectives; 4. To do each and everything necessary, suitable and proper at any time or place for the accomplishment of any purpose, or attainment of any or more of the objectives herein enumerated; and to exercise and possess all powers, rights and privileges necessary or incidental to purposes for which the corporation was organized or to the activities on which it is engaged, including the right to sue and enforce contracts, and in general, to exercise all powers, rights and prerogatives as may be granted or allowed by law or hereafter to the corporation organized under the laws of the Philippines." It is composed of physicians and child protection units from all over the Philippines dedicated to educating multi-disciplinary professionals such as physicians, social workers, lawyers, police and the judiciary in the integrated management of abused and neglected children. As part of its professional education thrust, CPU Net will host the 7th ISPCAN Asian Regional Conference to be held at the Hotel Philippine Plaza from September 23 to 26, 2007 entitled "AKO PARA SA BATA" (I am for the Child). This is a biennial Asian conference which will be held for the first time in the Philippines with delegates from various professional, governmental and non-governmental organizations of different countries throughout Asia, Europe, Australia and America to discuss the following issues: Child physical and sexual abuse Children in conflict with the law Children in natural disasters Child sex tourism and trafficking EAHDac CPU Net has prepared simultaneous symposia and workshops that would benefit the different disciplines needed in addressing the above child abuse and neglect issues. Speakers from the Philippines as well as other Asian countries, the US, Europe and Australia will share their expertise and experiences on what works and what can be applied in different cultural settings. Moreover, it has tapped the ISPCAN executive councilors, the US Office of Juvenile Justice and Delinquency Prevention (OJJDP), Child Rights Education for Professionals (Cred-Pro), ECPAT and the Philippine Judicial Academy (PHILJA), among others, to conduct workshops for specific disciplines. The Department of Social Welfare and Development (DSWD) is a major partner of CPU-Net in the Conference. CPU Net has solicited various donations from persons, corporations and organizations, here and abroad, who have given the aggregate amount of Four Million Six Hundred Forty Thousand Pesos (PhP4,640,000) all of which are intended to defray the expenses that will be incurred before and during the Conference. Most of the expenses involve sponsorship of invited international speakers and registration and support of Asian and local participants. CPU Net expects that Six Million Five Hundred Thousand Pesos (PhP6,500,000) more will be needed to fully cover these expenses. CPU Net is currently in the process of securing its accreditation with the Philippine Council for NGO Certification, Inc. (PCNC). 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. On the issue of deductibility of donations from the gross income of the respective donors, 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 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 depending on the donee's compliance with the level of administrative expense and utilization requirements. EIAaDC In case of failure on the part of the accredited NGO to comply with the level of administrative expense and utilization requirements, its donors shall be entitled only to the limited deductions in an amount not in excess of 10% in the case of an individual, and 5% in the case of a corporation, of the donor's taxable income derived from trade, business or profession as computed without the benefit of Section 34 (H) of the Tax Code of 1997, 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 an accredited NGO 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). Incidentally, Section 13 (C) of Revenue Regulations (Rev. Regs.) No. 2-2003 otherwise known as the "Consolidated Revenue Regulations on Estate Tax and Donor's Tax Incorporating the Amendments Introduced by Republic Act (R.A.) No. 8424, the Tax Reform Act of 1997" provides, viz. : "(C) Notice of donation by a donor engaged in business. In order to be exempt from donor's tax and claim full deduction of the donation given to qualified donee institutions duly accredited by the Philippine Council for NGO Certification, Inc. (PCNC), the donor engaged in business shall give notice of donation on every donation worth at least Fifty Thousand Pesos (P50,000) to the Revenue District Office (RDO) which has jurisdiction over his place of business within thirty (30) days after receipt of the qualified donee institution's duly issued Certificate of Donation, which shall be attached to the said Notice of Donation, stating that not more than thirty percent (30%) of the said donation/gifts for the taxable year shall be used by such accredited non-stock, non-profit corporation/NGO institution (qualified-donee institution) for administration purposes pursuant to the provisions of Section 101(A)(3) and (B)(2) of the Code." In relation to the above regulations, Sections 5 and 6 of Rev. Regs. No. 13-98 implementing R.A. No. 8424 specifically, Section 34 (H) thereof relative to the deductibility of contributions or gifts actually paid or made to accredited donee institutions in computing taxable income, states that "SECTION 5. Certificate of Donations. All accredited non-stock, non-profit corporation/NGO are required to issue a certificate of donation in such form as prescribed by the BIR, on every donation or gift they receive. Such certificate shall be accomplished by the said accredited non-stock, non-profit corporation/NGO in triplicate and distributed within thirty (30) days after the receipt of the donation, as follows: THSaEC (a) Original copy Donor (b) Duplicate copy BIR (c) Triplicate copy Donee SECTION 6. Notice of Donations. The donor, on the other hand, should give a notice for every donation worth over One Million pesos (P1,000,000) to the Revenue District Officer where his place of business is located within thirty (30) days after the receipt of the Certificate of Donation attaching to the said notice the copy of the Certificate of Donation issued to him by the accredited non-stock, non-profit corporation/NGO." It is clear from the foregoing that the only obligation of the donee for every donation or gift it receives is to issue in triplicate the proper COD within thirty (30) days after the receipt of the donation. It should furnish the donor and RDO having jurisdiction over it (donee) one copy each of the COD and keep the last copy for itself. On the part of the donor and for purposes of full deductibility from his/its taxable business income, the donor should be the one to notify within thirty (30) days from receipt of the COD, the RDO where his/its place of business is located, of donations worth Fifty Thousand Pesos (P50,000) which he/it made and have the COD stamped at the concerned RDO. In view of the foregoing, CPU Net must first be accredited with the PCNC 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 in order that donations to it can be exempt from donor's tax and its donors can claim full deductibility from their respective taxable business income. 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.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue