Question & AnswerQ&A (BIR REGULATIONS NO. 10-2003)
The primary purpose of BIR Regulations No. 10-2003 is to implement the tax provisions of Republic Act No. 8525, known as the Adopt-a-School Act of 1998, specifically the tax incentives for adopting private entities that assist public schools.
A 'private entity' refers to an individual engaged in trade, business, or professions, or other business organizations like partnerships, corporations, or cooperatives, whether resident or non-resident, who team up with DepEd, CHED, or TESDA to assist public schools.
Assistance may include infrastructure, teaching and skills development, learning support, computer and science laboratories, food and nutrition, and other forms of aid, help, contribution, or donation provided by an adopting private entity.
Adopting private entities are entitled to a deduction from their gross income of the amount actually spent for the Adopt-a-School Program plus an additional 50% of such contribution/donation. They are also exempted from donor's tax on the assistance provided.
They must provide official or delivery receipts, a list of projects/activities with costs, proof or acknowledgment of receipt by the public school, and an approved Agreement endorsed by the National Secretariat.
For personal property, it is based on acquisition cost or depreciated value if used. Consumable goods are valued at acquisition cost or actual cost at donation time, whichever is lower. Services are valued at agreed service value in the MOA or actual expenses, whichever is lower. Real property is valued at the fair market value or book value/depreciated value, whichever is lower.
The National Secretariat endorses necessary documents to the Revenue District Office (RDO) including notarized Agreements, Deeds of Donation, official receipts, and proof of receipt. The adopting private entity must submit an application for the special 50% deduction and donor's tax exemption to the RDO, with copies to the RDO having jurisdiction over donated real property if applicable.
The VAT and excise tax, if any, on imported goods for foreign donations are assumed by DepEd, CHED, or TESDA as the consignee or importer, except where importation is VAT-exempt under Section 109 of the Tax Code.
Yes, local donations of goods originally intended for sale are subject to VAT on transfer but the donor can claim input tax. The donee public school is the final consumer and cannot claim input VAT. Donations not considered 'transactions deemed sale' are exempt from VAT.
These rules take effect fifteen days after publication in the Official Gazette or a newspaper of general circulation, whichever occurs first.