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Let's Talk Tax

The benefits of giving

Edward D. Roguel Edward D. Roguel

What a great Christmas gift we (the Filipino people) received last month. After 154 days, the Marawi siege is over. Salute to all our selfless soldiers in bringing back peace in the southern island of Mindanao.

But as former British Prime Minister Neville Chamberlain once said, “In war, whichever side may call itself the victor, there are no winners, but all are losers.” In the Philippines, the war may have ended, but the sufferings of our brethren in Marawi still continue. As of last week, there are more than 4,000 families who are still in evacuation centers in neighboring towns or cities. Many houses, buildings, and other structures were also torn down, and it is estimated that more than P50 billion is needed to rehabilitate and rebuild Marawi City.

The only good thing brought about by the siege in Mindanao is the outpouring of financial support from individuals and corporations both domestic and foreign. There are also various organizations that are raising funds to help rehabilitate war-torn Marawi.

Before donating, however, the donors sometimes ask what the tax benefits are. Could they claim a tax deduction? What are the tax implications of their donations?

Gifts to strangers (i.e., anybody who is not a sibling, spouse, ancestor, or lineal descendant; or a relative by consanguinity in the collateral line within the fourth degree of relationship) are subject to 30% donor’s tax. However, gifts to qualified donee institutions duly accredited by the Philippine Council for Non-Government Organizations (NGO) Certification, Inc. (PCNC) are exempt from donor’s tax, provided that the donor complies with certain conditions prescribed under the existing law and other relevant issuances. Gifts made to or for the use of the national government may also be exempted from donor’s tax.

If the donor is an individual not engaged in trade or business, he or she cannot claim any tax benefit for the donation, even if it is made to a qualified institution. If the donor — whether an individual or a corporation — is engaged in business, it may enjoy full deductibility against taxable income for making a donation to a qualified institution.

To be entitled to the tax exemption and deduction, however, the donor engaged in business is required under Revenue Regulation (RR) No. 02-03 to submit a notice of donation on every gift worth at least P50,000 to the Revenue District Office with jurisdiction over the donor’s place of business. This shall be filed within 30 days after receiving the certificate of donation issued by the qualified donee institution.

The mandatory information under existing tax regulations (i.e., RR Nos. 13-98 and 02-03) is required to be provided in the Certificate of Donation (BIR Form 2322) as prescribed under Revenue Memorandum Circular No. 86-2014. BIR Form 2322 consists of two parts — a donee certification and a donor’s statement of values. The donee certification indicates the donee’s confirmation of receipt of donation, the date it was received, and the amount of cash or the description of the property donated; and is signed by an authorized representative of the donee organization.

The donor statement, on the other hand, provides the description, acquisition cost, and net book value of the property donated as reflected in the donor’s financial statements, signed by an authorized representative. In cases of donation in kind, a copy of the sales document shall also be required to support the acquisition cost claimed by the donor.

The numerous requirements sometimes discourage certain donors. For them, the requirements suppress the spirit of giving by negating the purpose of the incentive, if not fully complied with and followed to the letter. Despite the difficulties, however, most donors continue to donate, because they know the true benefits of giving.

Giving without expecting in return can have some of the most impactful influences on our lives since it enables us to be selfless. Giving allows us to notice the world around us. A study conducted by the National Institutes of Health reveals that people feel more rewarded when they give money to charity. Perhaps because giving and helping is innate in every human being. The magnitude of our generosity, though, depends on how we nourish it.

Despite the difficulties, we should never stop being generous to good causes. We should always be good stewards. The gospel last Sunday on the Parable of the Talents reminds us that everything we have — our talents, resources, and life, among others — belongs to God. We are merely stewards of what belongs to God. Talents are entrusted to us not only for our own benefit but are meant to be shared with those who need them most. When we give wholeheartedly, we will receive the true benefits of giving, i.e., our Father will reward us (Matthew 6:3-4); and he loves a cheerful giver.

Edward D. Roguel is a partner of the Tax Advisory and Compliance and head of Japanese Business Group of P&A Grant Thornton. P&A Grant Thornton is one the leading audit, tax, advisory, and outsourcing services firms in the Philippines.

 

As pusblished in BusinessWorld, dated 21 November, 2017.