BIR Ruling [UN-023-95]

January 11, 1995 BIR RULING [UN-023-95] Caltex (Philippines) Inc. 6/F 6750 Ayala Avenue 1226 Makati, Metro Manila Attention: Atty . Catherine T . Manahan Tax Counsel Gentlemen : This refers to your letter dated December 12, 1994 requesting confirmation of your opinion to the effect that the donation of Caltex (Philippines), Inc. (Company) to CX Foundation, Inc. (Foundation) is exempt from the payment of donor's tax under Section 94(a)(3) of the Tax Code, as amended; and that for income tax purposes, said donation is deductible in full from the gross income of the company under Section 29(h)(2)(C) of the Tax Code, as amended. cdta It is represented that the Foundation is a non-stock, non-profit educational corporation duly registered with the Securities and Exchange Commission; that the purposes for which the corporation is formed are: 1) To promote, carry on, conduct and encourage the advancement and development of education, scientific research and training in the fields of industrial, technological, agricultural, health, environmental, biological, physical and social sciences as well as the humanities and all other sciences or fields of human knowledge and culture, with special emphasis on research, development, training and related activities designed to contribute to maximization of economic productivity, community development, wider distribution of social and economic values and protection and improvement of the environment, through financial aid and support, grants, scholarships, sponsorships, donations and other forms of assistance out of the funds of the Foundation; 2) To undertake, directly finance or assist pure or fundamental research, applied research, development work and/or granting of scholarships for scientific and technological manpower training, including but not limited to the establishment of professorial chairs in the field of industrial, agricultural, health sciences, biological and physical sciences and social science and humanities; 3) To sponsor, support, promote, encourage and finance educational activities and projects; conduct or otherwise support, find and provide ways and means to give educational and/or travel grants, seminars, lectures, conferences, meetings and exhibitions calculated to attain that purpose. xxx xxx xxx that in furtherance of its purposes, the foundation shall invest its funds, provided that the net profits derived from said undertaking shall not inure to any of the trustees, officers or members or any private individual but shall be exclusively for the maintenance and carrying out of the purposes of the Foundation; that the Foundation shall be maintained by the contributions of and endowments from persons, partnerships, corporations and other entities and supporters thereof whether domestic or foreign; that no part of the property or income of the Foundation shall inure to the benefit of any member, trustee or officer, or any private individual, corporation or association; that as a non-stock and non-profit foundation, it pays no dividends and it is governed by trustees who receive no compensation; that the level of administrative expenses of the Foundation shall not exceed thirty percent (30%) of the total expenses as defined under BIR-NEDA Regulations No. 1-81 as amended; and that it shall utilize directly the contributions it receives for the conduct of the activities constituting the purposes for which the Foundation is organized. cdtech In reply thereto, please be informed that pursuant to Section 94(a)(3) of the Tax Code, as amended, gifts in favor of an education and/or charitable, religious, cultural or social welfare corporation, institution, foundation, trust or philanthropic organization or research institution or organization shall be exempt from the donor's tax, provided, however, that not more than thirty per centum (30%) of said gifts shall be used by such donee for administration purposes. Such being the case, since the donee Foundation is a non-stock, non-profit educational corporation organized for educational and scientific purposes, the donation made in its favor by the Company is exempt from the payment of donor's tax pursuant to Section 94(a)(3) of the Tax Code, as amended, provided that not more than thirty per centum (30%) of said gifts shall be used by the donee for administration purposes. Section 29(h)(2)(C) of the Tax Code, as amended by Batas Pambansa Blg. 45, and as implemented by BIR-NEDA Regulations No. 1-81, as amended provides that donations to a private foundation which means a non-profit domestic corporation 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. Accordingly, for income tax purposes, donation in favor of the Foundation by the Company shall be deductible in full from the gross income of the corporate donor, Caltex (Philippines), Inc. (BIR Ruling No. 517-93 dated December 23, 1993). 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, ALICIA P. CLEMENO Assistant Commissioner (Legal Service)