Imported equipment donations of RBEs exempt from donor’s tax

0
136
  • BIR Revenue Regulations No. 15-2023 implements the grant of donor’s tax exemption for the donation of imported capital equipment, raw materials, spare parts, or accessories directly and exclusively used by registered business enterprises
  • RR 15-2023 outlines conditions for the exemption, including securing investment promotion agency approval and detailed deed of donation
  • Deductible amount from donor’s gross income subject to Tax Code limitations; substantiated with evidence, not subject to VAT

The Bureau of Internal Revenue (BIR) has issued rules implementing the grant of donor’s tax exemption on the donation of imported capital equipment, raw materials, spare parts, or accessories directly and exclusively used by registered business enterprises (RBEs).

BIR Revenue Regulations (RR) No. 15-2023, issued on December 13 and effective 15 days after its publication on December 18, aligns with Section 295(C)(2)(e) of the National Internal Revenue Code of 1997 (Tax Code), as amended by Republic Act No. 11534 or the Corporate Recovery and Tax Incentives for Enterprises, or CREATE, Act.

Under the Tax Code, donation of capital equipment, raw materials, spare parts, or accessories used directly and exclusively by the RBE of any investment promotion agency (IPA) to the Technical Education and Skills Development Authority (TESDA), state universities and colleges (SUCs), or Department of Education (DepEd) and Commission on Higher Education (CHED)-accredited schools are exempt from import duties and taxes, including donor’s tax.

RR 15-2023 specifically addresses the grant of donor’s tax exemption on the donation of imported capital equipment, raw materials, spare parts, or accessories directly and exclusively used in the registered project or activity by RBE of any existing IPAs.

Under the regulation, the donation of capital equipment, raw materials, spare parts, or accessories—which were granted tax and customs duty exemption—to TESDA, SUCs, or DepEd and CHED-accredited schools should be exempt from donor’s tax, subject to the following:

  • If made within the first five years from the date of importation, the RBE secures a Certificate of Approval issued by the concerned IPA
  • If made after five years from the date of importation, the RBE has provided prior notice to the concerned IPA
  • The deed of donation should indicate in detail the items donated, their quantity/number, and the amount/value of the donation for post-audit/ verification by the BIR

The amount/value of donation is deductible from the gross income of the donor subject to limitations, conditions and rules set forth in Section 34(H) of the Tax Code. This deduction is claimed in the taxable year in which the donation was made.

To substantiate the deduction, the donor can provide evidence such as sales invoices, deed of donation, delivery receipts, and other records indicating the claimed deduction. Additionally, proof of acknowledgment of receipt by TESDA, SUCs, or DepEd and CHED-accredited schools is required.

The donation is not treated as a transaction deemed sale subject to value-added tax under Section 106(B)(1) of the Tax Code, as amended.

The amount of the donation is based on the net book value of the capital equipment, raw materials, spare parts, or accessories donated. – Roumina Pablo