Let's Talk Tax

Benefiting through giving

A week ago, I was browsing through my social media feed and saw a post about kids crying and having fits on their first day at school. For a moment, I was suddenly reminded of how time flew by so quickly, so much that I almost failed to notice that we are already halfway through the year and that the school year has officially started. As I kept on browsing, I came across more posts about the school opening — pictures of crowded or makeshift classrooms, rants on the insufficiency or absence of educational supplies and facilities — the list goes on.

Indeed, it is that time of the year again when the never-ending issues concerning less privileged public schools resurface and draw public attention. Just imagining the daily struggles of a student enrolled in a not-so-well-equipped public school made me feel fortunate for not having to go through such inconveniences during my student life.

Although it is primarily the government’s responsibility to ensure that public schools are adequately equipped with the tools and facilities needed to provide quality and relevant education, private entities are very much welcome to make contributions that would help address the inadequacies that confront many of our public schools. In fact, the government encourages private sector support through Republic Act (RA) No. 8525 or the “Adopt-a-School Act of 1998.”

The Adopt-a-School Program allows private entities to assist a public school (elementary, secondary, or tertiary), preferably located in any of the 20 poorest provinces identified by the Presidential Council for Countryside Development or any other government agency tasked with identifying the poorest provinces. The assistance may be provided in, but is not limited to, the following areas: (a) infrastructure, physical facilities, furniture and real estate; (b) learning support; (c) health and nutrition; (d) reading programs; (e) technology support; (f) direct assistance; (g) training and development; and (h) assistive learning devices for students with special needs.

An Adopt-a-School Program is established through the following activities:

1. Signing of the Memorandum of Agreement (MoA) between the Department of Education (DepEd) or the adopted school and the adopting private sector entity. The MoA must specify the responsibilities and rights of both parties, including details of the donation/contribution, program implementation term, beneficiaries, donation value, etc.

2. Implementation of the agreed support by the adopting private sector entity to DepEd (or the school) as scheduled and execution of a deed of donation (which contains the actual peso worth of the support packages) in favor of the beneficiary school.

3. Execution of a deed of acceptance by DepEd (or the school) as a way of acknowledging the donation provided by the adopting private sector entity.

What makes the Adopt-a-School Program worth considering is that, aside from being able to help the country in providing quality education, the adopting private entity also gets to enjoy tax incentives. Under RA No. 8525, the adopting entity shall be allowed a deduction from the gross income of the amount of the contribution or donation that was actually, directly, and exclusively incurred for the Program, plus an additional amount equivalent to 50% of such contributions or donations. The deduction, however, shall still be subject to the limitations, conditions, and rules set forth under the Tax Code, such as the proper substantiation and timing of claiming the deduction. The adopting entity is also exempted from paying donor’s tax on the assistance extended to its adopted public school. For imported donations, any corresponding value-added tax and excise tax will be assumed by DepEd, the Commission on Higher Education (CHEd), or the Technical Education and Skills Development Authority (TESDA), as the case may be, being the consignee or importer.

To qualify for tax incentives, the private entity must be able to meet the following prerequisites at any time during the term of the MoA:

1. It must have a credible track record as an organization.

2. It must be paying its required taxes on time or within the concerned fiscal year.

3. It must have been in existence for at least one year as shown in its Articles of Incorporation from the Securities and Exchange Commission, Certificate of Registration at the Cooperative Development Authority, or business permit from the local government.

4. It must not have been prosecuted and found guilty of engaging in any illegal activities.

5. It must not be affiliated or connected to any group in the tobacco industry.

6. It must have a corporate mission and image aligned with the values that DepEd promotes.

The procedure for the availment of tax incentives by the adopting private sector entity involves the following:

1. The National Secretariat (or the office composed of representatives of the three education agencies — DepEd, CHEd, and TESDA — that will provide overall management and coordination of the Program) shall endorse to the Revenue District Office (RDO) of the Bureau of Internal Revenue (BIR) having jurisdiction over the place of business of the adopting private entity (copy furnished the RDO having jurisdiction over the property if the donation or contribution is in the form of real property), the following:

i. Duly notarized/approved Agreement;

ii. Duly notarized Deed of Donation;

iii. Official receipts or any document showing the actual value of the contribution/donation;

iv. Certificate of Title and Tax Declaration, if the donation is in the form of real property; and

v. Other adequate records showing the direct connection or relation of the expenses being claimed as deduction/donation to the adopting private entity’s participation in the Program, as well as showing or proving receipt of the donated property.

2. The adopting private entity shall submit application for entitlement to the additional 50% special deduction from the gross income, and for exemption from donor’s tax to the RDO under which it is registered (copy furnished the RDO having jurisdiction over property if the donation or contribution is in the form of real property). Below are the pertinent documents required from the adopting entity:

i. Letter of intent addressed to the Secretary of Education;

ii. Duly notarized Memorandum of Agreement;

iii. Duly notarized Deed of Donation and Deed of Acceptance;

iv. Official receipts or any document showing the actual value of the contribution/donation;

v. Certificate of Title and Tax Declaration, if the donation is in the form of real property, and tax clearance certificate and tax declaration issued by the Office of the Assessor. Aside from this, donors should also submit their recent real estate tax receipts;

vi. Other adequate records showing the direct connection or relation of the expenses being claimed as deduction/donation to the adopting private entity’s participation in the program, as well as showing or proving receipt of the donated property; and

vii. Documents related to in-kind donations such as time, use of space, professional service or skills, etc.

With the tax incentives involved, I hope that the Adopt-a-School program engages more private companies and even individuals to invest in the education of the Filipinos. In terms of contributing to the betterment of our country, I personally find the Adopt-a-School Program a more appealing alternative to simply paying taxes and waiting for this to turn into something beneficial for our country. I also hope the government enacts more laws similar to RA No. 8525 to encourage more private sector participation in building our nation. While the saying goes that it is better to give than to receive, it is even better to give and to receive.

 

Arianne Cyril L. Mandac is a senior with the Tax Advisory and Compliance division of P&A Grant Thornton. P&A Grant Thornton is one of the leading audit, tax, advisory, and outsourcing services firms in the Philippines.

 

As published in BusinessWorld, dated 13 June 2018