BIR Ruling No. 117-84

July 9, 1984 BIR RULING NO. 117-84 123-a-3-000-00-117-84 Gentlemen : This refers to your letter dated March 14, 1984 requesting a ruling on the following queries: "1. Can a Donor to DARN claim for tax deduction corresponding to the amount donated from his/her income tax and/or other tax obligations? "2. Can DARN be exempted from payment of amusement tax for benefit movie shows, stage shows, etc. staged in connection with its fund-raising drives? "3. Is DARN exempted from the payment of sales tax for vehicles and household appliances used as prizes in its current Raffle Draw benefit project? "4. What are the other BIR requirements needed to qualify a Donee (DARN) in claiming for tax exemptions?" Documentary evidence submitted show that the Drug Abuse Rehabilitation Network, Inc. (DARN) is a private non-stock and non-profit corporation duly accredited by the Government to operate and maintain a treatment and rehabilitation center for drug dependents and to conduct preventive education and community information; that the purpose for which DARN is formed are, viz: 1. To assist the government in its current anti-narcotics drive by enlisting public cooperation in the enforcement of the Dangerous Drugs Law. 2. To establish, operate and maintain rehabilitation clinics or centers capable of providing effective and sustained treatment of drug addicts. 3. To establish, operate and maintain training centers for potential anti-narcotics campaigners as well as to those who are willing to take active involvement in a national drive against narcotics and dangerous drugs. 4. To undertake a nation-wide information and education campaign aimed at enlightening and developing public consciousness on the dangers of drug abuse. 5. To trace, pinpoint and expose sources of narcotics and dangerous drugs to government agencies charged of enforcing the Dangerous Drugs Law. 6. To develop and cultivate drug awareness in all sectors of society. 7. To affect close coordination and establish harmonious relationship with government and private agencies engaged in the anti-narcotic crusade. that the corporation is maintained by the contributions, donations and endowments coming from members of the said corporation, from government sources and from the general public; that under Presidential Proclamation No. 2315 dated September 27, 1983, DARN is authorized to conduct a national fund campaign during the period from October 1, 1983 to September 30, 1984; and that DARN, its property, operations and transactions shall be exempt from all kinds of taxes, direct or indirect and any obligation for payment, withholding or collection of any tax or duty. In reply, I have the honor to inform you as follows: 1. Donors to DARN can claim deduction in full on corresponding to the whole amount they have donated or contributed only if DARN is registered as a qualified donee under BIR-NEDA Regulations No. 1-81, implementing Section 30(h) of the Tax Code, as amended by B.P. Blg. 45. In the absence of proof of such registration, donations to DARN shall be deductible only to an amount not in excess of 6% in the case of an individual donor, and 3% in the case of a corporate donor, of the donor's or contributor's taxable net income as computed without the benefit of said contribution or donation. However, since DARN is a civic league and operated exclusively for social welfare purposes, donations made in its favor are exempt from the donor's gift tax, pursuant to Section 123(a)(3) of the Tax Code, as amended, subject to the conditions that not more than 30% of the donation shall be fully used by DARN for administration purposes. (BIR Ruling No. 27-g-140-82-190-83 dated Nov. 15, 1983) 2. Amusement tax on theaters or movie shows is now governed by Presidential Decree No. 231 or the Local Tax Code. Accordingly, you may pose your query with the Ministry of Finance which has jurisdiction on the matter. 3. Under proclamation No. 2315, DARN is exempt from all kinds of taxes, direct or indirect on its property, operations and transactions. The scope of this tax exemption is that it include taxes indirectly payable by DARN, like sales taxes on vehicles and household appliances imposed under Sections 195, 196 and 197 of the Tax Code which may be billed to it by the manufacturers thereof. In this case, although the manufacturer of the vehicle or appliance is directly liable for the payment of the sales tax, the billing of the said tax to DARN would make the latter indirectly liable for the payment thereof. Under the aforesaid tax exemption, DARN is also exempt from indirect taxes, i.e., those taxes which make DARN indirectly liable. In other words, a manufacturer from whom DARN had purchased the vehicle or appliance used as a prize in its raffle benefit project should bill DARN without including therein the corresponding sales tax. In such case, said manufacturer is exempt from paying the sales tax due on the manufactured product sold to DARN. Please note, however, that pursuant to Section 53(b) in relation to Section 21(c) of the Tax Code, as amended by B.P. Blg. 135, DARN is required to withhold the 15% final withholding tax due on the raffle prize awarded to the winner. (BIR Ruling No. 160-83 dated September 14, 1983) 4. Finally, in order to avail of the benefits under Batas Pambansa Blg. 45, DARN should be registered with the Government and Tax Exempt Corporations Division of this Office as a qualified institution. cdta Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner