BIR Ruling [UN-134-95]

March 31, 1995 BIR RULING [UN-134-95] Pasig Medical & Maternity Clinic Foundation, Inc. No. 70 A. Rodriguez Ave., Rosario Pasig, Metro Manila Attention: Mr . Jesus B . Ermita President Gentlemen : This refers to your letters dated September 22, 1994 and October 26, 1994 requesting for a ruling on the deductibility for income tax purposes, of the following: "a. Donation of Medicines to the Foundation, in support of the Free Medical Clinic, Health Services Program, being given to the Urban Poor Patients of Pasig and its surrounding municipalities." "b. Services rendered by Doctors in the said Free Medical Clinic, given by the Foundation to the Urban Poor Patients." Documents submitted show that the Pasig Medical & Maternity Clinic Foundation, Inc. is non-stock, non-profit domestic corporation duly registered with the Securities and Exchange Commission for the following primary purposes: 1. To establish a business office, with the main objective of utilizing said office as the main venue of activities, related to the organization, propagation and extension of assistance to the needy low-income group patients of Pasig Medical & Maternity Clinic, with postal address at No. 79 A. Rodriguez Avenue, Rosario, Pasig, Metro Manila, in terms of giving preferential privileges in the consultation fees, and medical services; and 2. To initiate the availment of assistance and/or donations in cash or in kind (Medical & Hospital Equipment) or any other type of equipment, from local or foreign person(s), entities, institution(s) or any civic, religious, social, industrial, medical, professional groups or instrumentalities, interested and willing to support the main objective of assisting the low income group patients of Pasig Medical & Maternity Clinic, a major founding member of Pasig Medical & Maternity Clinic Foundation. that it is registered with this Office under Certificate of Registration No. 2239 as a donee institution in accordance with the provisions of BIR-NEDA Regulations No. 1-81 and is entitled to the benefits set forth in Section 30(h) [now Section 29(h)] of the National Internal Revenue Code, as amended by Batas Pambansa Bilang 45. In reply, please be informed that since you are a corporation organized and operated for social welfare purposes, donations made in your favor 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 for administrative 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. Under Section 29 of the Tax Code as amended by Republic Act No. 7496 [An Act Adopting the Simplified Net Income Taxation Scheme (SNITS) for the Self-Employed and Professionals Engaged in the Practice of Their Profession), and as implemented by Revenue Regulations No. 2-93, effective July 28, 1992, individuals engaged in business or practice of profession shall only be allowed as deduction from gross income, among others, contributions made to the Government and accredited relief organizations for the rehabilitation of calamity-stricken areas declared by the President . 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 of medicines and services by doctors in your favor in support of the Free Medical Clinic given by your Foundation to the urban poor patients of Pasig and its surrounding municipalities cannot be claimed by the said doctors as deduction in computing their taxable income under Section 21(f) of the Tax Code, as amended. (BIR Ruling No. 517-A-93 dated December 23, 1993) cdta Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service) By: ALICIA L. TOMACRUZ Head Rev. Executive Asst. (Legal)