Alsons Development & Investment Corporation

December 20, 2017 BIR RULING NO. 670-17 R.A. No. 8525; Section 34 (H) (2), Tax Code of 1997; BIR Ruling No. 292-2016 Alsons Development & Investment Corporation 329 Bonifacio St.,Davao City Attention: AAA _______________ Gentlemen : This refers to your letter dated April 8, 2016, requesting on behalf of Alsons Development and Investment Corporation ("Alsons") for the availment of the exemption from donor's tax and deductibility of its donation made in accordance with Republic Act (R.A.) No. 8525, otherwise known as the "Adopt-a-School Act of 1998." Based on the documents submitted, it is shown that Alsons (TIN: 000-000-000-000) is a domestic corporation duly registered with the Securities and Exchange Commission (SEC) under SEC Registration No. 22023; that on May 10, 2013, Alsons entered into a Memorandum of Agreement (MOA) with Cabantian National High School (the "school"),whereby Alsons has proposed to the school to subsidize the wages of six (6) of its non-DepEd teaching plantilla for the school years 2013-2014, 2014-2015 and 2015-2016; that Alsons executed a Deed of Donation dated April 1, 2015 in favor of Cabantian National High School whereby the former donated to the latter the total amount of P___________ for the wages of the school's non-DepEd teaching plantilla for the period covering January to March 31, 2015; that on June 3, 2015, a MOA was likewise executed between Alsons and Maa National High School whereby Alsons proposed to provide materials for the repair of flooring and walls of the school's second floor classrooms; and that a Deed of Donation dated August 11, 2015 was executed between Alsons and Maa National High School in which the former donated to the latter the amount of P___________ for the aforesaid repair. In reply, please be informed that under Section 34 (H) (2) (a) of the Tax Code of 1997, as amended, donations to the Government, its agencies or political subdivisions are deductible in full from the gross income of the donor. However, donations not in accordance with the National Priority Plan are subject to limited deductibility or deductions to an amount not exceeding 10% in the case of an individual and 5% in the case of a corporation of the taxpayer's taxable net income as computed without the benefit of this deduction. Moreover, Section 5 of RA No. 8525 provides for an additional deduction from the gross income of the adopting entity equivalent to fifty percent (50%) of the expenses incurred for the project, to wit: "SEC. 5. Additional Deduction for Expenses Incurred for the Adoption. Provisions of existing laws to the contrary notwithstanding, expenses incurred by the adopting entity for the 'Adopt-a-School Program' shall be allowed an additional deduction from the gross income equivalent to fifty percent (50%) of such expenses. Valuation of assistance other than money shall be based on the acquisition cost of the property. ..." The above provision is implemented by Revenue Regulations (RR) No. 10-2003 which provides for the guidelines in the availment of the additional deduction for the expenses incurred by the adopting entity: "SECTION 3. Tax Incentives Accruing to the Adopting Private Entity. A pre-qualified adopting private entity, which enters into an Agreement with a public school, shall be entitled to the following tax incentives: (a) Deduction from the gross income of the amount of contribution/donation that were actually, directly and exclusively incurred for the Program, subject to limitations, conditions and rules set forth in Section 34(H) of the Tax Code, plus an additional amount equivalent to fifty percent (50%) of such contribution/donation subject to the following conditions: (1) That the deduction shall be availed of in the taxable year in which the expenses have been paid or incurred; (2) That the taxpayer can substantiate the deduction with sufficient evidence, such as official receipts or delivery receipts and other adequate records (2.1) The amount of expenses being claimed as deduction; (2.2) The direct connection or relation of the expenses to the adopting private entity's participation in the Adopt-a-School Program. The adopting private entity shall also provide a list of projects and/or activities undertaken and the cost of each undertaking, indicating in particular where and how the assistance has been utilized as supported by the Agreement; and (2.3) Proof or acknowledgment of receipt of the contributed/donated property by the recipient public school. (3) That the application, together with the approved Agreement endorsed by the National Secretariat, shall be filed with the Revenue District Office (RDO) having jurisdiction over the place of business of the donor/adopting private entity, copy furnished the RDO having jurisdiction over the property, if the contribution/donation is in the form of real property. (b) Exemption of the Assistance made by the donor from payment of donor's tax pursuant to Section 101 (A)(2) and (B)(1) of the Tax Code of 1997." Accordingly, since Alsons Development and Investment Corporation is compliant with the requirements set forth under Section 3 of RR 10-2003, the amount it actually, directly and exclusively incurred in the wage subsidy and repair of the school's flooring and walls amounting to P___________ (P___________+___________) 1 is fully deductible from its gross income, plus an additional deduction equivalent to fifty percent (50%) thereof in the amount of P___________, or a total deductible amount of P___________. (BIR Ruling No. 292-2016 dated June 27, 2016) Lastly, the above donation is likewise exempt from the payment of donor's tax pursuant to R.A. No. 8525, as implemented by RR No. 10-2003, and Section 101 (A) (2) of the Tax Code of 1997, as amended. (BIR Ruling No. 292-2016 dated June 27, 2016) 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.) CAESAR R. DULAY Commissioner of Internal Revenue Footnotes 1. While the Indorsement from Br. Armin A. Luistro, Secretary of DepEd, states that 100% of the donation amounts to P___________, the Deed of Donation dated August 11, 2015, covers only the amount of P___________.