FULL DEDUCTIBILITY OF DONATIONS TO FIGHT COVID-19
By: Atty. Carence Navidad on April 23,2020
FILIPINOS’ “bayanihan spirit” is again on display amid the coronavirus disease 2019 (Covid-19) pandemic. Various sectors have been contributing financially, donating various medical equipment, supplies and food to several health facilities and frontline workers across the country.
Republic Act 11469, or the “Bayanihan to Heal as One Act,” empowered the government to grant any benefit to ease the burden of affected persons and implement Covid-related measures, as long as these are reasonable and necessary. In response, the Bureau of Internal Revenue (BIR) has issued Revenue Regulation 9-2020, which listed guidelines for donors to follow when claiming exemption from donor’s tax, as well as full tax deductions from donations made to combat the coronavirus.
As a general rule, the National Internal Revenue Code, or the Tax Code, allows exemptions from donor’s tax and full deductibility from gross income gifts and donations to the national government or any entity created by its agencies, which is not conducted for profit, subject to certain limitations; and accredited nonstock, nonprofit educational and/or charitable, religious, cultural or social welfare corporation, institution, foundation, nongovernment organization (NGO), trust or philanthropic organization, and/or research institution or organization. (Tax Code, sec. 101).
On the basis of the mandate under RA 11469, RR 9-2020 expanded the coverage of the exemption to the following:
– Private hospitals and/or nonstock, nonprofit education and/or charitable religious, cultural or social welfare corporation, institution, foundation, nongovernment organization (even if they are not accredited).
– Local private corporations, civic organizations and/or international organizations or institutions, provided that they shall actually, directly and exclusively distribute and/or transfer said donations/gifts to accredited NGOs and/or national government or any entity created by any of its agencies, which is not conducted for profit to any political subdivision of the government; and/or partner as conduit/logistical machinery with the accredited NGOs and/or national government or any entity created by any of its agencies, which is not conducted for profit to any political subdivision of the government.
Donations or gifts that can be considered exempt from donor’s tax and fully deductible against the gross income of the donor for income-tax purposes may consist of cash donations; donations of all critical or needed healthcare equipment or supplies; relief goods, such as but not limited to food packs (rice, canned goods, noodles, etc.) and water; and use of property, whether real or personal (shuttle service, lots or buildings).
To prove the donation, RR 9-2020 requires the donor to submit supporting documents prior to claiming deductibility, such as a Deed of Donation or a Certificate of Donation (BIR Form 2322) and a BIR-registered acknowledgement receipt for it. In addition, a donor that gave healthcare equipment and relief goods are required to submit a sworn certification providing details of the donation and that it was made solely for the purpose of fighting Covid-19. Donors to local private corporations, civic organizations and/or international organizations/institutions, on the other hand, are required to also submit proof of purchase if the donation is in kind.
The qualified donee is also required to submit a liquidation report and certificate of donation. The filing of notices of donation, which was previously required to be submitted by donees, has been dispensed with by the BIR. The enumerated documentary requirements should be submitted to the donees’ respective revenue district offices within 60 days after the enhanced community quarantine in lifted.
Certainly, the government and the private sector welcome donations to combat the coronavirus. However, to enable donors to enjoy an exemption from donor’s tax and the full deductibility of their donations, the conditions set in RR 9-2020 must be complied with.
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Carence Navidad is a junior associate of Mata-Perez, Tamayo & Francisco (MTF Counsel). This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. If you have any question or comment regarding this article, you may email the author at info@mtfcounsel.com or visit www.mtfcounsel.com.