BIR Ruling No. 316-14

August 11, 2014 BIR RULING NO. 316-14 Section 101 (A) (2) NIRC; BIR Ruling No. 175-11 Film Development Council of the Philippines 26th Floor, Export Bank Plaza Chino Roces Ave. cor. Sen. Gil Puyat Ave. Makati City Attention: Briccio G. Santos Chairman Gentlemen : This refers to your letter dated February 7, 2013, requesting confirmation that donations of real and personal property in favor of the Film Development Council of the Philippines ("FDCP") for the use of the National Film Archives of the Philippines ("NFAP") are exempt from donor's tax under Section 101 (A) (2) of the 1997 Tax Code, as amended. It is represented that FDCP, a government agency under the Office of the President, is the lead government agency for cinema to ensure that the economic, cultural and educational aspects of Filipino audiovisual materials, more particularly Filipino films, produced in the Philippines and/or abroad are duly preserved and protected for the benefit of the future generations of Filipinos. Pursuant to its mandate under Section 3 (10) of Republic Act No. 9167, calling for "the establishment of a film archive", FDCP has established the NFAP. NFAP as a cultural institution is not operated for profit and is in its infancy stage. Due to FDCP's limited government budget, it has to rely on local and foreign donations of real and personal properties in order to establish NFAP's permanent home and fully operate as a film archive. In reply, please be informed that donations made in favor of the Government and any of its agencies which are not conducted for profit, or to any of its political subdivisions, are exempt from the payment of the donor's tax pursuant to the provisions of Section 101 (A) (2) and Section 101 (B) (1) of the Tax Code of 1997, as amended, which provides to wit: ISDHEa "SEC. 101. Exemption of Certain Gifts. The following gifts or donations shall be exempt from the tax provided for in this Chapter: (A) In the Case of Gifts Made by a Resident. xxx xxx xxx (2) Gifts made to or for the use of the National Government or any entity created by any of its agencies which is not conducted for profit, or to any political subdivision of the said Government; xxx xxx xxx (B) In the Case of Gifts Made by a Nonresident not a Citizen of the Philippines. (1) Gifts made to or for the use of the National Government or any entity created by any of its agencies which is not conducted for profit, or to any political subdivision of the said Government." Considering that FDCP is an entity created under the Office of the President (Section 2, RA 9167), and its collection of reasonable fees and charges it imposes for services rendered shall be deposited in the National Treasury as a special account in the General Fund (Section 16, RA 9167), it is considered an entity created by an agency of the National Government which is not conducted for profit. Thus, any donation made in favor of FDCP shall be exempt from donor's tax in accordance with the above-quoted provisions. Furthermore, Section 17 of RA 9167 expressly provides that any donation, contribution, subsidy or financial aid made in favor of FDCP is exempt from taxes of any kind, viz. : "Section 17. Authority to Accept Donations. The Council may accept donations, contributions, grants, bequests or gifts, in cash or in kind, for various sources, domestic or foreign, except from movie producers, and distributors for purposes relevant to its functions. Said donations shall be deemed automatically appropriated for purposes specified by the donor or in the absence thereof; for the programs and projects as may be approved by the Council subject to the usual government accounting and auditing rules and regulations; Provided, That cash donations shall not be used to fund the personal services requirements of the Council. IcDCaS Any donation, contribution, subsidy or financial aid which may be made to the Council shall be exempt from taxes of any kind and shall constitute allowable deductions in full from the income of the donors, contributors or givers for income tax purposes ." (Underscoring supplied) In view of the foregoing, this Office is of the opinion as it hereby rules that donations of real and personal property in favor of FDCP, being an entity created by an agency of the National Government and is not conducted for profit, are exempt from donor's tax. 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