BIR Ruling [UN-055-A-95]

February 8, 1995 BIR RULING [UN-055-A-95] Atty. Balbino Gatdula, Jr. 699 M. Naval Street Navotas, Metro Manila S i r : This refers to your letter dated February 1, 1995 requesting for a ruling that donations to the Ecumenical Development Association of the Philippines, Inc. (EDAP) which is a social welfare organization, are exempt from the payment of donor's tax pursuant to Section 94 (a) (3) of the Tax Code, as amended; and, that contributions and donations to it shall be deductible in full from the gross income of the donors pursuant to Section 29(h)(2)(C) of the same Code. It is represented that EDAP is a social welfare organization duly registered with the Securities and Exchange Commission on November 25, 1991; that the purposes for which the corporation is formed are: (1) to help individuals as well as their families to improve their conditions and stations in life by assisting them to gain access to capital through loans, guarantees and investments; (2) to help support livelihood, health and deduction projects and (3) to help and assist persons, groups, cooperatives and other socially-oriented organizations to prepare and finance their projects to improve and alleviate their economic and social conditions; that the corporation shall be maintained thru contributions of its members and donations and/or endowment from the government by deeds, grants, devices or bequests from Ecumenical Development Cooperative Society (U.A.) and from other sources, local and abroad, and that no part of its net income shall inure to the benefit of any private individual or member. In reply thereto, please by informed that as a corporation organized for social welfare purposes, donations to EDAP are exempt from the payment of donor's tax pursuant to Section 94(a) (3) of the Tax Code, as amended, subject to the condition that not more than 30% of the said gifts shall be used by the donee, EDAP, for administration purposes. On the other hand, Section 29(h)(2)(C) of the Tax Code, as amended by Batas Pambansa Blg. 45, as implemented by BIR-NEDA Regulations No. 1-81, as amended by Revenue Regulations Nos. 1-82 and 10-82 provides that donations to a private foundation which means a non-profit domestic corporation or association 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. Pure compensation income earners are allowed to deduct from their gross compensation income only their personal and additional exemptions (Sec. 29, Tax Code). In view thereof, this Office is of the opinion as it hereby holds that for income tax purposes, contributions and donations in favor of the Ecumenical Development Association of the Philippines, Inc. by individual donors/contributors shall not be deductible from their gross income; and that since EDAP is a social welfare organization, donations in its favor shall be deductible in full from the gross income of corporate donors/contributors. 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. (BIR Ruling No. S-26-362-94) cdtech Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service)