QuestionsQuestions (BATAS PAMBANSA BLG. 45)
The general rule allows deductions to the extent not in excess of 6% of the taxpayer’s taxable net income for individuals and 3% for corporations, computed without the benefit of the charitable contribution deduction and the following subparagraph.
Contributions/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/political subdivision for exclusively public purposes; or to domestic corporations/associations organized and operated exclusively for religious, charitable, scientific, youth and sports development, cultural or educational purposes, or for the rehabilitation of veterans, or to social welfare institutions, with the condition that no part of net income inures to the benefit of any private stockholder or individual.
It requires that none of the donee’s net income benefits any private stockholder or individual. It is crucial because it defines whether the institution qualifies as a charitable/social welfare-type entity for purposes of the income tax deduction.
They are deductible in full when the donations are made to finance/provide for/use in undertaking priority activities in specified areas (education, health, youth and sports development, human settlements, science and culture, economic development according to a national priority plan determined by NEDA in consultation with appropriate government agencies and regional development councils, and private philanthropic persons/institutions). Donations not made according to the annual priority plan fall under the general limitation in Section 30(h)(1).
Such donation is no longer fully deductible; it becomes subject to the general limitation prescribed in Section 30(h)(1) (i.e., the 6%/3% cap depending on taxpayer type).
(B) Donations to foreign institutions or international organizations are fully deductible if fully deductible pursuant to or in compliance with agreements, treaties, commitments entered into by the Government of the Philippines or special laws. (C) Donations to “private foundations” that meet the statutory definition and conditions are deductible in full, subject to terms and conditions prescribed in the regulations.
A private foundation is a non-profit domestic corporation organized and operated exclusively for specified purposes (scientific/research/educational/character-building/youth and sports development/health/social welfare/cultural/charitable, or combinations), with no inurement of net income to private individuals; it must make “utilization” directly for active conduct of its purposes within the period required (not later than the 15th day of the third month after close of its taxable year, subject to extensions); it must keep administrative expenses within prescribed limits not exceeding 30% of total expenses; and upon dissolution, its assets must go to another non-profit domestic corporation for similar purposes or to the State for a public purpose, or be distributed by court to an organization for similar charitable purposes.
The foundation must make utilization directly for the purposes for which it is organized within the period not later than the 15th day of the third month after the close of its taxable year in which contributions are received. An extended period may be granted by the Minister of Finance in accordance with rules and regulations.
Administrative expenses must, on an annual basis, conform to the rules and regulations of the Minister of Finance but in no case may exceed 30% of total expenses.
They must be distributed to another non-profit domestic corporation organized for similar purposes, or to the State for a public purpose. Alternatively, a court may distribute them to another organization to be used in the manner that, in the judgment of the court, best accomplishes the general purposes for which the organization was organized.
“Utilization” includes: (i) any amount in cash or in kind (including administrative expenses) paid or utilized to accomplish one or more purposes of the foundation; and (ii) any amount paid to acquire an asset used (or held for use) directly in carrying out one or more purposes.
Yes, but only if at the time the amount is set aside, the foundation establishes to the satisfaction of the Commissioner that the amount will be paid for the specific project within a period prescribed by regulations but not exceeding 5 years, and the project is better accomplished by setting aside funds than by immediate payment.
Properties other than cash donated must be valued in accordance with rules and regulations prescribed by the Minister of Finance in consultation with appropriate government agencies.
Contributions or gifts are allowable as deductions only if verified under the regulations prescribed by the Minister of Finance.
The Minister of Finance must promulgate implementing rules and regulations (within 90 days after approval, per Section 2) consistent with national socio-economic development programs, and these regulations cover matters like utilization rules and other requirements for valuation and proof.
Qualified donees must apply for re-qualification with the Commissioner of Internal Revenue within the period provided by the implementing regulations. Donations to such organizations during the re-qualification period are allowed for full deductibility.
It repeals or modifies any general or special law allowing full deductibility of donations to any institution/entity (except donations made under Presidential Decrees Nos. 697 and 698) and any law allowing deduction of any investment for the purchase of cultural properties.