Published 10 April 2020, The Daily Tribune
The Filipino spirit is undoubtedly admirable. In times of calamity, we can count on our fellow Filipinos to offer a helping hand. The private sector would always work hand-in-hand with the public sector to alleviate the suffering of our countrymen. Individuals would pool in their resources, conduct donation drives, and let every single Filipino feel that the struggle is shared and that no one is left alone. This is the spirit of “Bayanihan”.
With the COVID-19 pandemic and the Enhanced Community Quarantine grinding the economy to a halt, the Bayanihan spirit is once again in prominent action. The sudden change in our daily lives has spurred calls for help: our healthcare frontliners are asking for personal protective equipment (PPEs), communities are calling for relief goods in the face of unemployment, and local government units are welcoming contributions for disinfectants and isolation facilities. However, donation may come with a price – the donor’s tax.
Are the Bayanihan efforts taxable?
As a general rule, the Philippine Tax Code imposes donor’s tax at six percent (6%) of the value of total gifts or donation of cash and/or property, such as PPEs, in excess of P250,000 during the calendar year. Accordingly, donation of funds or property amounting to P250,000 in a year will be exempt. Anything in excess will be subject to donor’s tax.
There are other exemptions from donor’s tax provided by the Tax Code such as: 1. gifts made to the National Government, or any of its agencies, or to any political subdivision; and 2. gifts in favor of educational and/or charitable, religious, cultural or social welfare corporation, institution, accredited non-government organization, trust or philanthropic organization or research institution or organization, especially if accredited as a donee-institution by the BIR.
Republic Act No. 11469, also known as the “Bayanihan to Heal as One Act”, was signed into law that provided the President, the power to “liberalize the grant of incentives for the manufacture or importation of critical or needed equipment or supplies for the carrying-out of the policy declared herein, including healthcare equipment and supplies.”
In the pursuit of the declared national policy, the Bayanihan to Heal as One Act has declared that there is an urgent need to immediately mobilize assistance in the provision of basic necessities to families and individuals affected by the imposition of Community Quarantine, that government should undertake measures to prevent the overburdening of the healthcare system and to partner with the private sector and other stakeholders and to deliver these measures and programs quickly and efficiently.
The Bayanihan to Heal as One Act provided the Philippine government the power to grant any benefit, in order to ease the burden on individuals under Community Quarantine.
Accordingly, Customs Administrative Order (CAO) No. 7-2020 dated 30 March 2020 was issued exempting the importation of health equipment and supplies deemed critical and necessary to address the COVID-19 public health emergency from customs duties, VAT on importation and fees.
In addition, the BIR issued Revenue Regulations (RR) No. 6-2020 dated 27 March 2020 which emphasized that donation of critical or needed healthcare equipment or supplies intended to combat the COVID-19 public health emergency, including PPEs, testing kits, and medical supplies, to the National Government, its agencies or to any political subdivision will be exempt from donor’s tax.
Also pursuant to the Bayanihan to Heal as One Act, the Office of the President issued Administrative Order (AO) No. 27 dated 31 March 2020, donations of medicines, medical equipment and supplies, and other health products intended to address the COVID-19 situation to the National Government and the Department of Health need to be coordinated with the Office of Civil Defense (OCD). Pursuant to existing tax rules and regulations, donations covered by AO No. 27 will be exempt from the donor’s tax.
Dated 6 April 2020, the DOF and BIR issued RR No. 9-2020, now categorically exempting from donor’s tax donations of cash, critical or needed healthcare equipment or supplies, relief goods, and use of property (e.g. shuttle service, use of lots/buildings), when made during the period of national emergency, for the sole and exclusive purpose of fighting against COVID-19, to private hospitals, and/or non-stock non-profit educational and/or charitable, religious, cultural or social welfare corporation, institution, foundation, non-government organization (even if non-accredited), trust or philanthropic organization and/or research institution or organization.
Donations of the same items to local private corporations, civic organizations, and international organizations are likewise exempt from donor’s tax, provided that they shall actually, directly, and exclusively distribute and/or transfer said donations/gifts to or partner as conduit or logistical machinery with accredited non-government organizations, the national government, or to any of its political subdivisions.
Consistent with BIR Revenue Memorandum Order No. 10-2020 dated 30 March 2020 and the BOC CAO No. 7-2020, the incentives under RR No. 9-2020 shall be available during the three (3) month effectivity of the Bayanihan to Heal as One Act from 16 March 2020, unless extended or withdrawn by Congress or ended by Presidential Proclamation.
This once-in-a-generation pandemic is testing our humanity, and what better way to prove our humanity than to remind ourselves of our selfless co-existence in this shared world through giving. Responding to the unique exigencies, it has given leeway to the spirit of Bayanihan that should be liberalized from the power of the purse of the government.
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