Donation by a Multinational Company in Favor of Government-Owned or Controlled Corporations

October 21, 1988 BIR RULING NO. 517-88 29 (h) 393-87 517-88 Gentlemen : This refers to your letter dated September 19, 1988 requesting a ruling as to whether the contemplated donation by a multinational company of one IBM System 38 computer together with all its accessories to be made in your favor is deductible in full from the gross income of said donor. It is represented that you were established in 1981 by virtue of Presidential Decree No. 1832; that Section 12 of said Presidential Decree authorizes the hospital to receive donation from all sources whether foreign or domestic and whether government or private; and that such donation shall be exempt from income, gift and all other kinds of taxes and shall further be deductible in full for income tax purposes. In reply thereto, we have the honor to inform you that P.D. 1931 issued on July 11, 1984 withdrew all exemptions from the payment of duties, taxes, fees, imposts and other charges granted in favor of government-owned or controlled corporations including their subsidiaries. Moreover, Executive Order No. 93 effective March 10, 1987 withdrew all tax and duty incentives granted to government and private entities. As such, your exemption from fees, duties and taxes under Section 13 of Presidential Decree No. 1832 has already been withdrawn. Pursuant to Section 29(h)(1) of the Tax Code, as amended, contributions or gifts actually paid or made within the taxable year to, or for the use of the Government of the Philippines or any of its agencies or any political subdivision thereof for exclusively public purposes shall be deductible from the gross income of the donor like the multinational company in this case, to the extent of 3% of the taxpayer's taxable income derived from business as computed without the benefit of this or other deductions. cdti However, under Section 29(h)(2)(A) of the same Code, this particular donation may be deductible in full since the same is granted in your favor as a government agency or fully-owned government corporation provided that the donation is exclusively to finance, to provide for, or to be used in undertaking priority activities in education, health, youth and sports development, human settlements, science and culture, and in economic development according to a national priority plan to be determined by the NEDA in consultation with appropriate government agencies, including its regional development councils and private philanthropic persons and institutions, provided further that any donation which is made to the Government or to any of its agencies or political subdivisions not in accordance with the said annual priority plan shall be subject to the aforesaid limitation of 3% prescribed in Section 29(h)(1) of the Tax Code. Very truly yours, (SGD.) EUFRACIO D. SANTOS Deputy Commissioner