BIR Ruling [UN-328-95]

September 12, 1995 BIR RULING [UN-328-95] Ng Law Firm Rm. 407 Campos Rueda Bldg. 101 Urban Ave., Makati City Attention: Atty . Nelson Y . Ng Gentlemen : This refers to your letter dated June 19, 1995 stating that a group of civic leaders and private law practitioners have initiated a project to raise fund known as Makati Courts Computer Fund intended to buy a set of computers and printers to be donated to all the Regional Trial Courts and Metropolitan Trial Courts of Makati City; that in connection therewith Savings Account No. 013-105752-2 in the name of Makati Courts Computer Fund was opened with Union Bank, J.P. Rizal Branch, Makati City to receive all donations; that no withdrawal of said fund will be authorized by any private individual and the fund will be used exclusively to buy computers, printers and paraphernalia for the use of all the Regional Trial Courts and Metropolitan Trial Courts of Makati City; that only the Executive Judge of the Regional Trial Court of Makati City, jointly with other committee members can withdraw said fund; and that there are no administrative expenses to be incurred for salary of personnel. Based on the foregoing representations, you are now requesting a ruling that the donations to the Makati Courts Computer Fund to be used in the purchase of sets of computers and printers for the Regional Trial Courts and Metropolitan Trial Courts of Makati City are deductible from gross income to the extent of 6% for private individuals and 3% for corporate donors; and that the said donation is exempt from donor's tax under Section 94(a)(1) of the same Code. In reply, please be informed that 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 a corporate donor to the extent of 3% of the taxpayer's taxable income derived from business as computed without the benefit of this and other deductions. Accordingly, donation to the Regional Trial Courts and Metropolitan Trial Courts of Makati City by a corporate donor being a donation to government agencies, is deductible from its gross income to the extent of 3% of its taxable income derived from business as computed without the benefit of this and other deductions. However, under Section 29 of the Tax Code, as amended, in the case of individuals, pure compensation income earners are allowed to deduct only their personal and additional exemptions from their gross compensation income arising from personal services rendered under an employer-employee relationship. Thus, donations to the Regional Trial Courts and Metropolitan Trial Courts of Makati City by an individual receiving pure compensation income are not deductible. On the other hand, 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 whose taxable income are subject to tax under Section 21(f) of the same Code are allowed to deduct from their gross income, among others, contributions made to the Government and accredited relief organizations for the rehabilitation of calamity-stricken areas declared by the President. Hence, donation to the Regional Trial Courts and Metropolitan Trial Courts of Makati City by an individual engaged in business or practice of profession being a donation to the government, is deductible from the gross income of such individual donor. Moreover, the said donation being a donation by residents in favor of the Government, the same are exempt from the donor's tax imposed under Section 91 of the Tax Code pursuant to Section 94(a) (2) of the same Code. (BIR Ruling No. 239-94 dated August 12, 1994; BIR Ruling No. 517-A-93 dated December 23, 1993) cd Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service)