Skiddoo Philippines Inc

Are Donations To Yolanda Victims Taxable?

After learning so many lessons from our Ondoy, Pablo, and two previous habagat volunteering and donating experiences, I have become cautious where to course through our personal donations.

And upon witnessing personally how local government units and government officials handle (and personally used the people’s donations), I have only handed my donations through the Philippine Red Cross and a few other groups recognized as non-government organizations such Gawad Kalinga and Rock Ed Philippines since I have been a volunteer of these groups since several years back.

Aside from these reasons, I have also considered the tax implication of being a donor. If you are not aware, giving a gift to anyone isn’t totally free in the Philippines unless you know how and who to course it through.

Otherwise, you have to pay the Donor’s Tax if you’re giving gifts to the wrong organizations or individuals.

1. Who are required to file the Donor’s 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.

2. What donations are tax exempt?

• Dowries or donations made on account of marriage before its celebration or within one year thereafter, by parents to each of their legitimate, recognized natural, or adopted children to the extent of the first P10,000

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

Gifts in favor of an educational and/or charitable, religious, cultural or social welfare corporation, institution, accredited non-government organization, trust or philantrophic organization or research institution or organization, provided not more than 30% of said gifts will be used by such donee for administration purposes

• Encumbrances on the property donated if assumed by the donee in the deed of donation

• Donations made to the following entities as exempted under special laws:

– Aquaculture Department of the Southeast Asian Fisheries Development Center of the Philippines
– Development Academy of the Philippines
– Integrated Bar of the Philippines
– International Rice Research Institute
– National Social Action Council
– Ramon Magsaysay Foundation
– Philippine Inventor’s Commission
– Philippine American Cultural Foundation
– Task Force on Human Settlement on the donation of equipment, materials and services

Therefore, if you hand over your donations to corporate entities or individuals not included in the list as tax-exempt, your donations shall be taxable according to the tax rate table below from the National Internal Revenue Code of the Bureau of Internal Revenue (BIR).

donors tax

1. Rate applicable shall be based on the law prevailing at the time of donation.
2. When the gifts are made during the same calendar year but on different dates, the donor’s tax computed on the total net gifts during the year.

Donation made to a stranger is subject to 30% of the net gift. A stranger is a person who is not a:
• brother, sister (whether by whole or half blood), spouse, ancestor and lineal descendants; or
• relative by consanguinity in the collateral line within the fourth degree of relationship (up to first cousin).

According to Punongbayan & Araullo, it is best to course donations to the government or any of its agencies or political subdivision to avail of exemption from donor’s tax.

You may also send your donations to educational, charitable, religious, cultural or social welfare institutions, accredited non-government organizations, trust or philanthropic organizations and research institutions or organizations.  Other than these, donations to other entities or individuals shall be subject to donor’s tax.

Who are the accredited donee entities?

These refer to a non-stock, non-profit corporations or associations organized and operated exclusively for religious, charitable, scientific, athletic, cultural, social, health or charitable purposes deemed qualified by the Philippine Council for NGO Certification (PCNCC).

More UK aid for Typhoon Haiyan response arrives at Cebu airport in the Philippines
More UK aid for Typhoon Haiyan response arrives at Cebu airport in the Philippines

This is under the condition that not more than 30% of the donations for a particular year are to be used for administration purposes.  In order to be accredited by the PCNCC, the entity should secure a valid registration with the government agency that exercises regulatory function over such corporation, association or NGO.

Again, if you are donating an amount greater than P100,000, make sure that you are giving it through reliable government entities and legitimate non-government organizations (NGO’s) to be exempt from donor’s tax.

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P.S. 2. Angelpreneur and EntrepChamp Paulo Tibig will be gracing our next webinar called “Make Your Business Idea Happen” on November 15, 2013 , Friday at 3PM (Philippine time). Paulo will be answering your questions about your business ideas, how to start or expand one, and how to successfully sustain it. To attend this FREE and LIVE Q&A sessions, please register here.

Photo credit: DFID, UK Department for International Development

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