Proposal of CFO Chairperson for an Executive Issuance to Facilitate the Tax and Duty-Free Processing of Foreign Donations

May 16, 2011 DOF OPINION Secretary Julia Andrea Abad Presidential Management Staff Office of the President of the Philippines Malacaang Palace, Manila Dear Secretary Abad : This refers to your request for comment on the proposal of Secretary Imelda M. Nicolas, Chairperson, Commission on Filipino Overseas, for an executive issuance similar to Memorandum Order No. 36, to facilitate the tax and duty-free processing of foreign donations even during times without calamities. As a general rule, all donations coming from abroad are subject to the payment of duties, taxes and other charges before they are released from customs custody. Currently, there is no law specifically granting duty and tax exemption to medical equipment and supplies brought in by foreign medical missions. Under existing laws, only the following donations to non-government organizations may be granted customs duty exemption: 1. Donations to duly accredited relief organizations endorsed by the Department of Social Welfare and Development (DSWD) pursuant to Section 105 (l) of the Tariff and Customs Code of the Philippines. Importation thereof is currently regulated by DSWD Administrative Order No. 06, Series of 2010, (Revised Omnibus Guidelines in the Management and Processing of Donations); and 2. Donations to non-stock/non-profit charitable and/or religious institutions, including government and private (Primary and secondary) hospitals duly registered with the Department of Health (DOH), pursuant to the last paragraph of Section 105 of the TCCP, upon favorable recommendation by the National Economic and Development Authority (NEDA), in accordance with its existing rules and regulations. Both donations are subject to the payment of Value Added Tax (VAT) under Section 107 of the National Internal Revenue Code, as amended. While we fully support the endeavor of the CFO to streamline the processing of foreign donations, full duty and tax exemption may not be granted under the proposed executive issuance. The Office of the President may only waive customs duties under Section 105 of the TCCP. Grant of tax exemption requires legislative action. ACcaET However, if the donations were made in favor of the Office of the President or the Commission on Filipino Overseas (CFO), we may apply Section 13 of R.A. No. 10147 (General Appropriations Act for 2011), which provides for automatic appropriation of duties and taxes payable by national government agencies arising from foreign donations. Release of donations under this scheme may be processed directly with the Bureau of Customs pursuant to DOF-DBM Joint Circular No. 1-03 dated August 15, 2003. It may be noted that importations under Memorandum Order No. 36 were considered as donations to the Office of the President under the General Appropriations Act. Also, the PMS Guideline on M.O. 36 requires the submission of recommendations from appropriate government agencies prior to the release of the shipments. Warm regards. (SGD.) CESAR V. PURISIMA Secretary