Tax Articles

Revisiting Taxability of Donations

By: Atty. Rodel C. Unciano

In times of calamity, donations from our kind-hearted countrymen are certainly a big help not only in giving temporary aid to the victims of calamities but in giving them as well a hope to start a new life and a hope for them to see again the light of the day. This too, is a big help to the government who is primarily responsible in seeing to it that the affected citizens are afforded the full assistance they truly deserve.

Based on our Tax Code, donations made during the calendar year in excess of two hundred fifty thousand pesos (P250,000) shall be subject to six percent (6%) donor’s tax, which the donor is required to pay to the Bureau of Internal Revenue (BIR) within thirty (30) days from the date of donation. Recall that under the Train Law, the uniform rate of six percent (6%) donor’s tax shall now apply whether the recipient of the donations are relatives of the donor or strangers.

If the donations made during the calendar year do not exceed two hundred fifty thousand pesos (P250,000), the donations are exempt from the imposition of donor’s tax. But even if the amount of donations during the year exceed two hundred fifty thousand pesos (P250,000), the donations may still be exempt from donor’s tax if the same is given to qualified government institution or to qualified non-government donee institution.

To qualify for exemption from donor’s tax, the donations to the government must be made to or for the use of the National Government and qualified government institutions and any entity created by any of its agencies which is not conducted for profit, or to any political subdivision of the said Government.

The exemptions shall also apply if the donations are made 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 that not more than thirty percent (30%) of said gifts shall be used by such donee for administration purposes. Donations made to certain institutions are likewise exempt from the imposition of donor’s tax by virtue of express provision provided under the charter creating such institutions such as the Philippine Red Cross, International Rice Research Institute and the People’s Survival Fund, among others.

As the law provides, the exemption from donor’s tax is dependent on the status of the donee or the recipient of the donation. Hence, to determine whether the donation is exempt from donor’s tax or not, it is necessary to take into consideration the status of the donee. If the donee falls under any of the qualified exempt donee institutions as enumerated in the Tax Code or under special laws, then, the donation shall be exempt from donor’s tax.

Thus, if the donation intended to be given, whether in the form of cash or in kind, exceeds two hundred fifty thousand pesos (P250,000), it would be best to course through said donation to a qualified donee institution in order to qualify for exemption from donor’s tax. If the donations are directly given by the donor to the victims, the exemption may not apply, no matter how noble the donor’s intention may be. More so, if the donations are coursed through an accredited donee institution, the donor shall likewise be entitled to the full deductibility of the donations made, subject only to certain conditions.

True, the government recognizes the liberality of donor’s by way of giving tax benefits. However, certain conditions must be taken into consideration in order for the donor to avail of the full tax benefits provided under the law.