(Revenue Regulations No. 15-2023, issued on December 13, 2023)
This Tax Alert is issued to inform all concerned on the tax exemptions of donation of imported capital equipment, raw materials, spare parts, or accessories, which were granted tax and customs duty exemption, by registered business enterprises to the TESDA, state universities, and colleges (SUCs), or DepEd and CHED-accredited schools in pursuant to Section 295(C)(2)(e) in relation to Section 101 (A)(2) of the Tax Code, as amended by RA No. 11534 or CREATE Law.
The donation shall be exempt from donor’s tax, provided the following requisites:
a) If made within the first five (5) years from the date of importation, the registered business enterprise secures a Certificate of Approval issued by the concerned Investment Promotion Agency;
b )If made after five years from the date of importation, the registered business enterprise has provided prior notice to the concerned Investment Promotion Agency; and
c) The deed of Donation shall indicate in detail the items donated, their quantity/number, and the amount/value of the donation for post-audit verification by the Bureau of Internal Revenue.
The net book value of the donation shall be deductible from the gross income in the taxable year donated and subject to limitations, conditions, and rules in Section 34(H) of the Tax Code.
The donor can substantiate the deduction with sufficient evidence, such as sales invoice/s, deed of donation, delivery receipt and other adequate records indicating the following:
a) The amount of donation being claimed as deduction; and
b) Proof of acknowledgement of receipt of the donated capital equipment, raw materials, spare parts, or accessories by TESDA, SUCs or DepEd and CHED-accredited schools.
Lastly, for VAT purposes, it shall not be treated as transaction deemed sale subject to VAT.