Department of Environment and Natural Resources

October 14, 2019 ITAD BIR RULING NO. 033-19 Section 101 (B) (1); National Internal Revenue Code of 1997, as amended Department of Environment and Natural Resources Visayas Avenue, Diliman 1100 Quezon City Attention: AAA _______________ Gentlemen : This refers to your letter dated November 24, 2017 requesting confirmation that light-emitting diode (" LED ") streetlights and household solar power system (collectively referred to as " items ") donated by the Government of the People's Republic of China, through its National Development and Reform Commission (" NDRC "),to the Department of Environment and Natural Resources (" DENR ") are exempt from donor's tax under Section 101 (B) (1) of the National Internal Revenue Code of 1997 (" Tax Code "),as amended. SDHTEC On November 15, 2017, NDRC and DENR entered into a Memorandum of Understanding Concerning the Provision of Goods for Addressing Climate Change (" MOU ") where NDRC agreed to provide 20 million yuan worth of LED streetlights and household solar power system to DENR to enhance the Philippines' domestic capacity in combatting climate change. NDRC agreed to provide to the local government beneficiaries, through DENR ,the following: Local Government Unit Number of Beneficiaries Items Specifications Quantity Province of Antique 100 barangays (approximately 116,080 individuals) Solar LED streetlight 40 watts 1,562 units 150 barangays (approximately 179,848 individuals) Household solar power system 10 watts peak 769 units Municipality of El Nido, Palawan 6 barangays (approximately 7,025 individuals) Solar LED streetlight 20 watts 555 units DENR is a Philippine government agency created under Executive Order No. 197 series of 1987, 1 and responsible for the conservation, management, development, and proper use of the country's environment and natural resources, and for the licensing and regulation of natural resources. On the other hand, NDRC is a macroeconomic management agency under the Chinese State Council with a primary objective to formulate and implement strategies of national economic and social development, annual plans, medium and long-term development plans, to coordinate economic and social development, and to carry out research and analysis on domestic and international economic situation, among others. 2 Under Article IV of the MOU, DENR shall assume all the taxes for the abovementioned goods when they enter into the territory of the Philippines, and the beneficiaries shall be responsible for the clearance, delivery and transportation of the goods when they arrive at the port of Manila and shall bear all costs arising therefrom . In reply, please be informed that the items imported into the Philippines are subject to value-added tax (" VAT ") under Section 107 (A) of the Tax Code. Under the MOU, DENR shall assume the VAT and other related taxes on these imported items. However, with respect to donor's tax ,the items donated to DENR ,being a Philippine government agency, are exempt from donor's tax pursuant to Section 101 (B) (1) of the Tax Code because those items are made to and for the use of the National Government, to wit: SEC. 101. Exemption of Certain Gifts . The following gifts or donations shall be exempt from the tax provided for in this Chapter: xxx xxx xxx (B) In the Case of Gifts Made by a Nonresident not a Citizen of the Philippines. (1) Gifts made to or for the use of the National Government or any entity created by any of its agencies which is not conducted for profit, or to any political subdivision of the said Government." (Emphasis ours) This ruling is issued on the basis of the facts as represented. However, if upon investigation it shall be disclosed that the actual facts are different, then this ruling shall be without force and effect insofar as the herein parties are concerned. AScHCD Very truly yours, (SGD.) CAESAR R. DULAY Commissioner of Internal Revenue Footnotes 1. Entitled Providing for the Reorganization of the Department of Environment, Energy and Natural Resources, Renaming It as the Department of Environment and Natural Resources, and for Other Purposes . 2. http://en.ndrc.gov.cn/