Shobe_CEO » BIR Ruling No. 107-82 (April 6, 1982)

BIR Ruling No. 107-82 (April 6, 1982)

June 5th, 2009

123-a-3 000-00 107-82

Atty. Oscar L. Uy

Suite 309 First United Bldg.

Escolta, Manila

S i r :

This refers to your letter dated September 26, 1980 requesting that the donations made in favor in the Fraternity of Freemasons represented by the Most Worshipful Grand Lodge of the Free and Accepted Masons of the Philippines and the Supreme Council of the Thirty-Third and Last Degree, Ancient and Accepted Scottish Rite of Free-masonry of the Republic of the Philippines be exempted from the donor’s gift tax as well as full deduction of said donations for income tax purposes.

In reply thereto, I have the honor to inform you that according to the articles of incorporation submitted by you, the organization is a fraternal, charitable and beneficiary Society in the form of a private non-stock corporation. Under Section 123(a)(3) of the Tax Code, gifts in favor of an educational and/or charitable, religious, cultural or social welfare corporation, institution, foundation, trust or philanthropic organization or research institution or organization, are exempt from the donor’s gift tax. Under this provision, the donee organization must be organized solely for either one of said purposes, or a combination thereof. In the case of said organization, while it is engaged for charitable purposes, it is also engaged for fraternal and beneficiary purposes which are not within the purview of said tax exemption provision. Accordingly, net gifts to the said organization exceeding P1,000 are subject to the donor’s gift tax imposed by Section 121 of the Tax Code. cdtai

Neither can the donors to the said organization claim full deduction of their donations for income tax purposes. Under Section 30(h) of the Tax Code, as amended by Batas Pambansa Blg. 45, only those donations to non-profit domestic corporation which are organized and operated exclusively for scientific, research, educational, character-building and youth and sports development, health, social welfare, cultural or charitable purposes, or a combination thereof, no part of the net income of which inures to the benefit of any private individual, can be claimed for full deduction. As heretofore stated, the above-named organization is not organized solely for charitable purposes or a combination of the purposes enumerated in Section 34(h), as amended by Batas Pambansa Blg. 45.

Finally, the donors cannot claim the donations to the above-named organization as deduction to an amount not exceeding 6%, in the case of an individual, or 3% in the case of a corporation, for the reason that the donee organization is not organized or operated exclusively for religious, charitable, scientific, youth and sports development, cultural or educational purposes or for the rehabilitation of veterans; and it is not a social welfare institution. [Sec. 30(h)(l), Tax Code]

It is understood that the aforesaid organization is exempt from income tax in respect to income derived by it as a fraternal, charitable and beneficiary society and, therefore, need not file an income tax return concerning such income. [Sec. 27(c) and (e), Tax Code]. However, the income of whatever kind and character of said organization from any of its properties, real or personal, or from any of its activities conducted for profit, regardless of the disposition made of such income shall be subject to internal revenue taxes. (Sec. 27, Tax Code, as amended by P.D. No. 1457). Moreover, it is required to file on or before April 15 of each year a profit and loss statement and balance sheet with the annual information return under oath, stating its gross income and expenses incurred during the year and a certificate showing that there has not been any change in its By-Laws, Articles of Incorporation, manner of operation and activities as well as sources and disposition of income.

It is requested that a copy of this letter be attached to the annual information return which you will file on or before April 15 of each year. cdt

Very truly yours,

RUBEN B. ANCHETA

Acting Commissioner

Entry Filed under: Taxation