Tax Implications for Donations

What are the tax implications of those donations?

As a general rule, donations made to strangers are subject to 30% donors tax
based on net gifts. Stranger is a person who is not (a) a brother, sister (whether by
whole or half-blood), spouse, ancestor, and lineal descendant; or (b) a relative by
consanguinity in the collateral line within the fourth degree of relationship. Also,
donations made between business organizations and those made between an
individual and a business organization shall be considered as donation made to a
stranger. [1]
But donations made to some institutions specifically identified by law are exempt
[2] from donors tax such as the following:
1. Gifts made to or for the use of the National Government or any entity created
by any of its agencies which is not conducted for profit, or to any political
subdivision of the said Government, including Government Owned and/or
Controlled Corporations (GOCCs), National Disaster Risk Reduction and
Management Council (NDRRMC) and Department of Social Welfare and
Development (DSWD).
2. Gifts in favor of an educational and/or charitable, religious, cultural or social
welfare corporation, institution, accredited nongovernment organization, trust
or philanthropic organization or research institution or organization provided
not more than 30% of the said gifts shall be used by the donee for
administrative purposes.
3. Gifts to other entities exempted under special laws like Philippine National
Red Cross and International Rice Research Institute.
Revenue Regulation 2-2003 did not give specific exemption from donors tax for
donation made to strangers unlike to donation made to donee who is not a stranger
which specifically exempt the first Php100,000 donation. [3]
Any person making a donation (whether direct or indirect), unless the donation is
specifically exempt under the Code or other special laws, is required, for every
donation, to accomplish under oath a donors tax return in duplicate. On the other
hand, donors claiming exemption from donor's tax on their donations and
contributions to accredited non-stock, non-profit corporations/NGOs should submit
evidences or proofs showing the amount of donation.
The donors tax return shall be filed within thirty (30) days after the date the gift is
made or completed and the tax due thereon shall be paid at the same time that the
return is filed.
The deductibility of these donations against the gross income would be the next
concern of these donor companies. Certain donations may be deducted in full but
some are subject to limitations. Donations to the following are deductible in full:

1. Donations to Government of the Philippines or to any of its agencies or

political subdivisions, including GOCCs, exclusively to finance, to provide for,
or to be used in the undertaking priority activities in education, health, youth
and sports development, human settlements, science and culture, and in
economic development according to National Priority Plan determined by
National Economic and Development Authority (NEDA), in consultation with
appropriate government agencies, including its regional development councils
and private philanthropic persons and institutions.
2. Donations to certain foreign institutions or international organizations in
pursuance of or in compliance with agreements, treaties, or commitments
entered into by the Government of the Philippines and the foreign institutions
or international organizations or in pursuance of special laws.
3. Donations to accredited Nongovernment Organizations (NGO) subject to
conditions enumerated in Section 3 (b) of RR 13-1998.
Donations made to non-accredited organizations shall be subjected to limited
deductibility in an amount not in excess of ten percent (10%) for an individual donor,
and five percent (5%) for a corporate donor, of the donor's income derived from
trade, business or profession as computed without the benefit of this deduction.
Donors claiming donations and contributions to accredited non-stock, non-profit
corporation/NGO as deductions from their taxable business income should submit
evidences or proofs to the BIR by showing the Certificate/s of Donation and
indicating therein the following:
i.

Actual receipt by the accredited non-stock, non-profit corporation/ NGO of the

donation or contribution and the date of receipt thereof; and

ii.

The amount of the charitable donation or contribution, if in cash; if property,

whether real or personal, the acquisition cost of the said property.

And lastly, Value Added Tax (VAT) on donated goods could be a concern for
some. Donations in kind from abroad will be subjected to VAT upon arrival in the
Philippines. Section 107(A) of the NIRC of 1997, as amended states that there shall
be levied, assessed and collected on every importation of goods a VAT based on the
total value used by Bureau of Customs, such tax to be paid by the importer prior to
the release of such foods from customs custody. So in case of donations to DSWD
and NDRRMC, it is the Philippine government who will pay for the VAT.
Another instance of VATable donation is donation of goods or properties originally
intended for sale or for use in the course of trade or business. Under Section 106(B)
of the NIRC, transfer, use of consumption not in the course of business of goods or
properties originally intended for sale or for use in the course of business is a
transaction deemed sale. For example, a donation made by a manufacturing
company of goods they manufactured for sale is subject 12% VAT.

Tax Implications for Donations

Q: Who are required to file the Donors Tax Return?
Every person, whether natural or juridical, resident or non-resident, who
transfers or causes to transfer property by gift, whether in trust or otherwise, whether
the gift is direct or indirect and whether the property is real or personal, tangible or
intangible.

Q: What is tax exemption?

Tax exemption is a reduction or elimination of the taxes normally imposed on
individuals and organizations by the government.
Q: Are NGOs/NPOs exempt from paying tax?
Tax exemption, according to Section 30 of the Tax Code, can be granted to an
organization that is non-stock and nonprofit, and operated or organized exclusively
for charitable purposes. It is essential to remember, however, that this tax exemption
is not absolute.
However, NGOs, whether engaged or not in microfinance activities, are not
exempt with respect to their withholding tax liabilities. They are required to file
withholding tax returns and remit withholding taxes on all income payments that are
subject to withholding.
Q: What is Donors Tax (aka Gift Tax)?
Donors Tax is a tax imposed on the privilege of transmitting property by and
from a living person to another by way of donation.
Q: What is a donee institution?
An organization with a donee institution status is granted the right to receive
tax-deductible and tax-exempt donations under the 1995 Tax Code. The PCNC can
certify NGOs for this status, which is subject to the final approval of the BIR. Donors
to a donee institution are entitled to donors tax (30% of donation plus 12% value
added tax) and 100% tax deductibility of donations from gross income of donor
company.
Q: How can I have my NGO accredited as a donee institution?
The accreditation of NGOs/NPOs to donee institutions can be done by the
following agencies: Department of Social Welfare and Development, for
charitable/social welfare organizations, and foundations; Department of Science and
Technology, for organizations engaged in research and other scientific activities; the
Philippine Sports Commission for organizations and foundations engaged in sports
development; National Council for Culture and Arts, for organizations engaged in
cultural activities; and the Commission on Higher Education, for organizations
engaged in educational activities.

Previously, the PCNC was the duly designated accrediting entity for donee
institutions. However, it was eventually deemed that it may amount to an undue
delegation of power, since the PCNC is a private body. With the issuance of
Executive Order No. 671 (October 2007), this function has been transferred to the
several agencies listed above.
Q: What is the basis of the BIR to grant an NGO the donee institution status?
The NGO must be certified by the PCNC (Philippine Council for NGO
Certification).
Q: Are there tax benefits granted to taxpayers who donate to accredited
institutions?
Yes! Donors enjoy certain tax privileges like deductibility of donations and
exemption from donors tax.
Full deductibility of donations is allowed only for donations to accredited
NGOs. For donations to non-accredited NGOs, the deduction is allowed only up to
10% for an individual donor and 5% for a corporate donor, of the donors business
income.
Donations to accredited NGOs/NPOs shall be exempt from donors tax as long as
not more than 30% of the said donations for the taxable year shall be used by such
NGO for administration purposes.
Q: Do NGOs receive tax incentives?
Yes, Philippine NGOs receive tax incentives under the law, such as tax
exemption and donee institution status, which allows local donations to be deducted
from the donors taxable income and exempted from donors tax.
Q: Can the donations be deducted in full?
Yes, donations, contributions or gifts that are made within the taxable year to
accredited NGOs can be fully claimed as deduction. However, the deduction cannot
exceed 10% of the income of an individual donor, and 5% for a corporate donor.
Q: What are Documentation requirement for deductibility of donations?
(Revenue Memorandum Circular No. 86-2014, December 5, 2014)
Pursuant to Section 8 of Revenue Regulations 13-98, taxpayers claiming
donations as deduction from gross income in computing the income tax, must
present to the BIR the Certificate of Donation indicating the actual receipt and date of
donation and the amount of cash, or acquisition cost if in property
These information shall be provided in the Certificate of Donation (BIR Form
2322). The Form consists of two parts:

1. the donee certification on the receipt of the donation and indicating the
date and amount of cash or description of the property donated, signed by an
authorized representative.
2. the donor statement on the description, acquisition cost and net book value
of the property donated as reflected in its financial statements, signed by an
authorized representative. Copy of the sales document will also be required to
support the acquisition cost. - BIR Form No. 2322 (Certificate of Donation).

Reference:
1.

Donors Tax - http://www.bir.gov.ph/index.php/tax-information/donor-stax.html

2. Tax Implication - JF. Alita, CPA-Senior, Tax Advisory
Services http://www.alasoplascpas.com/publication-taxupdate-v639-SideNews-Tax-Implications-for-Donations.php
3. National Internal Revenue Code [2] Sec. 101, NIRC of 1997 [3] Sec. 10 (A),
RR 2-2003
4. Essence of Giving - http://www.legalaspects.ph/765/bir-tax-deductions-ondonations-require-proof/

Documentation for deductibility

of donations
Documentation for deductibility of donations (Revenue
Memorandum Circular No. 86-2014, December 5, 2014)
Pursuant to Section 8 of Revenue Regulations 13-98, taxpayers claiming donations as deduction from gross income in
computing the income tax, must present to the BIR the Certificate of Donation indicating the actual receipt and date of
donation and the amount of cash, or acquisition cost if in property
These information shall be provided in the Certificate of Donation (BIR Form 2322). The Form consists of two parts:
1. the donee certification on the receipt of the donation and indicating the date and amount of cash or description of the
property donated, signed by an authorized representative.
2. the donor statement on the description, acquisition cost and net book value of the property donated as reflected in its
financial statements, signed by an authorized representative. Copy of the sales document will also be required to
support the acquisition cost.
Please access the link below for a copy of BIR Form No. 2322 (Certificate of Donation).

REVENUE REGULATIONS NO. 13-98

(December 8, 1998)
DEDUCTIBILITY OF DONATIONS OR GIFTS TO ACCREDITED INSTITUTIONS
These regulations govern the deductibility of contributions or gifts actually paid or made to accredited
donee institutions, and the procedures and requirements for the accreditation of donee institutions.
Donations or gifts made by a corporation, an individual engaged in trade or business, or an individual
engaged in the practice of his profession, to accredited non-stock, non-profit corporations or nongovernment organizations (NGOs) qualified donee institutions may be claimed as deduction from their
gross income.
In addition, these donations are exempt from the donors tax. However, as a condition to the
exemption from the donors tax, not more than thirty percent (30%) of the said donations and gifts for
the taxable year shall be used by such accredited non-stock, non-profit corporations or NGOs for
administration purposes.
The amount of donation that will be allowed as deduction from gross income is determined in
accordance with the following rules:
a. Limited Deductibility. Donations, contributions or gifts actually paid or made within the
taxable year to accredited non-stock, non-profit corporationsmust not exceed ten
percent (10%) of the income of an individual donor, and five percent (5%) for a
corporate donor. The maximum amount of deductible donation will be computed
based on donors taxable income without the benefit of this deduction.
a. Full deductibility. The full amount of donations, contributions or gifts actually paid or
made within the taxable year to accredited NGOs are allowed as deduction.

Accreditation of Qualified Donee Institutions

A non-stock, non-profit corporation/organization refers to a corporation or association organized under
Philippine laws exclusively for one or more of the following purposes:
o

Religious

Charitable

Scientific

Athletic

Cultural

Rehabilitation of veterans

Social Welfare

No part of the net income or asset of the corporation or association should belong to or inure to the
benefit of any member, organizer, officer or any specific person.
On the other hand, a non-government organization (NGO) is a non-stock non-profit domestic
corporation/organization organized and operated exclusively for any of the following purposes:
o

Scientific

Research

Educational

Character-building, youth and sports development

Health

Social welfare

Cultural

Charitable

In addition to the condition that no part of the net income inures to the benefit of any private individual,
the entity must also comply with the following requisites to be considered as an NGO:
1. It utilizes the contributions directly for the active conduct of the activities constituting
its intended purpose(s). This must be achieved not later than the 15 th day of the
3rd month after the close of the taxable year when the contributions were received,
unless an extended period has been granted by the Secretary of Finance.
2. The level of administrative expenses on annual basis does not exceed thirty percent
(30%) of the total expenses for the taxable year; and
3. In the event of dissolution, the assets would be distributed to another accredited NGO
organized for similar purpose, or to the State for public purpose.

In selecting the Accrediting Entity, the DOF must select the organization that has a countrywide
membership composed of NGOs which belong to the sector that the Private Accrediting Entity intends
to certify; NGOs which have been in existence for at least five (5) years; and NGOs not more than
50% of the members of which belong to other existing NGOs or private accrediting agencies. Based
on this criteria, the Secretary of Finance has designated the Philippine Council for NGO Certification,
Inc. (PCNC) as the Accrediting Entity.
Application for accreditation of donee institutions will be undertaken as follows:
1. Newly organized and existing non-stock, non-profit corporations and NGOs will apply
with the Accrediting Entity for accreditation and submit to a process of examination
and evaluation.
2. The Accrediting Entity will evaluate and accredit non-stock, non-profit
corporations/NGOs using identified criteria such as mission and goals; resources;
program implementation and evaluation; and planning for the future.
3. The Secretary of Finance, upon the recommendation of the Accrediting Entity, can
waive the submission of audited financial statements for newly-organized non-stock,
non-profit corporations/NGOs which have been organized to carry out programs of
national significance.
4. The Accrediting Entity will issue a Certificate of Accreditation to qualified non-stock,
non-profit corporation/NGO. This certification is valid for a maximum of five (5) years
for existing non-stock, non-profit corporations/NGOs, and three (3) years for newlyorganized institutions.
5. The Accrediting Entity shall notify applicants who fail to meet the criteria for
accreditation. Such entities will have one year within which to implement the
recommendations of the Accrediting Entity, after which it may re-apply for
accreditation.
The Secretary of Finance and the BIR Commissioner will oversee, monitor and coordinate with the
Accrediting Entity to ensure that the rules for accreditation as set forth under the regulations are
complied with.
Those who have qualified as donee institutions under BIR-NEDA Regulations No. 1-81 are given
three (3) years from the effectivity of the new rules within which to secure a Certificate of Accreditation
from the Accrediting Entity. During this period, donations to these entities will still be allowed as
deductible expense on the part of the donors. After the three-year period, only donations and
contributions to non-stock, non-profit corporations/NGOs which have been newly accredited by the
Accrediting Entity will be allowed as deduction from gross income.
Additional Requirements for Deductibility of Donations
The taxpayer must present the Certificate of Donation which accredited non-stock, non-profit/NGOs
are required to issue on every donation they received. Following the prescribed BIR form, the
certification is required to be distributed within thirty (30) days after the receipt of the donation. The
certification should contain the following information:
o

Actual receipt of donation

Date of receipt

Amount of donation if in cash. If the donation is in the form of a property, whether real
or personal, the certificate must indicate the acquisition cost of said property.

For every donation worth over P1.0 Million, the donor is required to notify the BIR Revenue District
Office where his business is located. The notice must be submitted within thirty (30) days after the
receipt of the Certificate of Donation from the donee institution, which must be attached to said notice.
Upon filing of their income tax returns/annual information return, accredited non-stock, non-profit
corporations/NGOs must furnish the BIR RDO of the place where it is located with the following
information:
o

List of donations received during the year showing the name and address of the
donors; sources of income; amount or market value of each donation

List of the activities and/or projects undertaken by the institution

List of projects, their corresponding costs; the amount set aside and status of funds

A declaration that the required utilization of the donations are complied with

A declaration that no part of the net income inures to the benefit if any private
stockholder or individual, and

A declaration of the status of project implementation.