QuestionsQuestions (BIR REGULATIONS NO. 10-2003)
The Regulations implement the tax incentives provisions of Republic Act No. 8525 (Adopt-a-School Act of 1998). It cites Sections 4 and 244 of the National Internal Revenue Code of 1997 as the statutory basis for promulgation.
An adopting private entity is an individual engaged in trade or business or engaged in the practice of a profession, or a business organization (e.g., partnership, corporation, cooperative), resident or non-resident, that teams up with DepEd, CHED, or TESDA to provide assistance to public schools.
Assistance may be in the form of (but not limited to) infrastructure, teaching and skills development, learning support, computer and science laboratories, and food and nutrition.
The agreement must be a Memorandum of Agreement (MOA) or an Agreement/Deed of Donation entered into between the adopting private entity and the public school, specifying terms, conditions, tasks, and responsibilities.
It may claim (a) a deduction from gross income of the actual contribution/donation incurred for the Program, subject to Tax Code limitations, plus an additional 50% special deduction under stated conditions; and (b) exemption of the assistance from payment of donor’s tax pursuant to Sections 101(A)(2) and (B)(1) of the Tax Code of 1997.
The deduction must be availed in the taxable year the expenses were paid or incurred; it must be substantiated with sufficient evidence (e.g., official receipts and adequate records showing amount, direct connection to the Program, and proof/acknowledgment of receipt by the public school); and the application with the approved Agreement endorsed by the National Secretariat must be filed with the proper RDO.
It refers to an application for tax credit under the Act, which in this Regulations is operationally understood as an application for additional deduction in arriving at net taxable income.
DepEd, CHED, or TESDA (as consignee or importer) assumes the VAT and excise taxes on importation, except when importation is VAT-exempt under Section 109 of the Tax Code.
VAT on importation payable by the concerned national government agency to the National Government is deemed automatically appropriated and is treated as government expenditure pursuant to the Government Appropriation Act provisions, as determined by Congress annually.
The transfer of goods/properties is subject to VAT on the transfer under Section 106(B)(1) of the Tax Code. The donor/adopting private entity may claim input VAT subject to allocation rules among taxable, zero-rated, and exempt sales; the donee-public school is deemed the final end-user and is not entitled to input VAT.
If it is not a deemed sale, the transfer of the goods or properties to the public school is exempt from VAT.
The value is based on the actual amount contributed/donated appearing in the official receipt issued by the donee (public school).
Personal property: acquisition cost, or if used, the depreciated value. Consumable goods: acquisition cost by the donor or actual cost at donation time, whichever is lower. Services: the value of services as agreed in the MOA/Agreement or the actual expenses incurred by the donor, whichever is lower.
It is the fair market value at the time of donation as determined under Section 6(A) of the Tax Code, or the book value/depreciated value, whichever is lower. Appraisal increase or appreciation recorded in books is not considered in computing book value.
It must endorse: (i) duly notarized/approved Agreement; (ii) duly notarized Deed of Donation; (iii) official receipts or document showing actual value of contribution/donation; (iv) certificate of title and tax declaration if real property; and (v) other adequate records showing direct connection of expenses to participation in the Program and proof of receipt.
The adopting private entity files the application with the RDO having jurisdiction over its place of business for the additional 50% deduction and the exemption from donor’s tax (with a copy furnished to the RDO with jurisdiction over the donated real property).