Question & AnswerQ&A (PRESIDENTIAL DECREE NO. 697)
The main purpose of Presidential Decree No. 697 is to exempt irrevocable donations of American-owned private lands acquired under the Laurel-Langley Agreement from payment of donor's tax and to recognize these donations as deductible business expenses for income tax purposes.
Only irrevocable donations of American-owned private lands acquired under the Laurel-Langley Agreement are exempt from donor's tax.
Donations must be valued at the fair market value based on the 1974 basis for real estate tax payment, and must be made to qualified donees such as the National Government, exempt organizations under other laws, or recognized charitable or scientific organizations with nationwide scope.
Qualified donees include (1) The National Government or any non-profit entities created by it or political subdivisions, (2) Organizations exempted from donor's tax by other laws, and (3) Charitable or scientific organizations with nationwide scope recognized as such, including Philippine Red Cross, Community Chests, Boy Scouts of the Philippines, and Philippine Heart Foundation.
No, donations made to family-owned or controlled foundations, or foundations created specifically to receive donations of lands or for a limited scope or purpose, are not qualified for the exemption.
Qualified donations are recognized as deductible business expense items for income tax purposes if the donor expressly indicates a deduction period not exceeding four years, including the year of donation, over which the deductions are taken in equal increments.
American private landowners must submit formal donation proposals to qualified donees before May 27, 1975.
Yes, the decree explicitly states that its provisions shall prevail notwithstanding any provisions of the National Internal Revenue Code or other laws to the contrary.
The 1974 fair market value is used as the basis for real estate tax payment and serves as the valuation metric for the private land donations to qualify for donor's tax exemption.
The decree took effect immediately as of May 9, 1975.