A foundation is a non-stock, non-profit corporation established for the purpose of extending grants or endowments to support its goals or raising funds to accomplish charitable, religious, educational, athletic, cultural, literary, scientific, social welfare or other similar objectives.
Tax benefits may be a reduction in the amount of tax that a person or organization would normally have to pay in doing certain types of commercial activity. For those engaged in foundations, the following tax benefits may be claimed:
- Income tax exemption of 30% for non-stock corporation or association organized and operated exclusively for religious, charitable, scientific, athletic, or cultural purposes, or for the rehabilitation of veterans, no part of its net income or asset shall belong to inure to the benefit of any member, organizer, officer or any specific person.
- Value-added tax (VAT) exemption of 12% for contributions and donations made to foundations and non-stock, non-profit organizations since it is the noble act that is being exempt from income tax.
- Fully deductible expenses (100%) for donors who made contributions to duly accredited donee-institutions by the BIR.
A donor is the person or organization who gives money or something else of value to an organization while a donee is considered as a beneficiary or the one that receives the bequest from donor or giver.
Donations made to non-accredited donee-institutions provides a limit of not more than 5% for corporations and 10% for individual tax payers based on their taxable income before deducting the donations made as provided by the tax rules.
- Donor’s tax exemption for donors giving contributions to foundations provided that not more than 30% of such gifts or donations for the taxable year are used for administrative purposes.
Under Revenue Memorandum Circular No. 86-2014, the donor/s claiming charitable contributions as deductions must submit a Certificate of Donation (BIR Form 2322), which contains a donee certification and a donor’s statement of values.
The donee certification contains:
- An indication that the donee received on the date indicated the subject matter (e.g., cash or property) of the donation.
- A description of the properties donated.
Note: The donee certification must be signed by an authorized representative of the donee organization.
A donor’s statement of values:
- Requires the donor to execute a statement which provides descriptions, acquisition costs, and net book values of the properties donated as reflected in the financial statements of the donor.
- Must also be accompanied by a deed of sale to prove the acquisition cost of the properties, subject to confirmation by the BIR as to its correctness and accuracy.
References:
BIR Revenue Memorandum Circular No. 86-2014
SEC Memorandum Circular No. 8-2006
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