In the Bible it is written – “For unto whosoever much is given, of him shall be much required, and to whom men have committed much, of him they will ask more.” [Luke 12:48] Hesiod said: “Do not seek evil gains, evil gains are the equivalent of disaster”. Euripides articulated: “There is no benefit in the gifts of a bad man.” Aristotle voiced that: “Liars when they speak the truth are not believed.” Publilius Syrus expressed that: “Pardon one offense, and you encourage the commission of so many”. Quintilian stated that” “Those who wish to appear wise among fools, among the wise seem foolish.” Marcus Valerius Martialis stated that: “Conceal a flaw, and the world will imagine the worst.” And my idol, the Beatles intoned that: “Get back, get back to where you once belonged.”

Under the Tax Code, the failure to file a return, supply correct and accurate information is punishable by a fine of not less than P10,000.00 and must suffer imprisonment of not less than 1 year but not more than 10 years. In addition, there shall be imposed in addition to the tax required to be paid a 25% surcharge penalty, the interest of 12% which is computed or imposed per day and in applicable cases, the compromise penalty. However, if there is an element of fraud such as but not limited to willful neglect to file the return within the period prescribed by the Tax Code, false or fraudulent return, or there is a substantial under declaration of taxable sales, receipts or income or substantial over declaration of deductions, then the surcharge penalty is automatically imposed at 50%.

Noteworthy, any person convicted of a crime penalized under the Tax Code, in addition to being liable for the payment of the tax, be subject to the penalties imposed therein. Payment of the tax due after apprehension shall not constitute a valid defense in any prosecution for violation of any provision of the Tax Code or in any action for the forfeiture of untaxed articles. Also, any person who willfully aids or abets in the commission of a crime penalized herein or who causes the commission of any such offense by another shall be liable in the same manner as the principal.

If the offender is not a citizen of the Philippines, he shall be deported immediately after serving the sentence without further proceedings for deportation. If he is a public officer or employee, the maximum penalty prescribed for the offense shall be imposed and, in addition, he shall be dismissed from the public service and perpetually disqualified from holding any public office, to vote and to participate in any election. If the offender is a Certified Public Accountant, his certificate as a Certified Public Accountant shall, upon conviction, be automatically revoked or cancelled. In the case of associations, partnerships or corporations, the penalty shall be imposed on the partner, president, general manager, branch manager, treasurer, officer-in-charge, and employees responsible for the violation.

The fines to be imposed for any violation of the provisions of the Tax Code shall not be lower than the fines imposed therein or twice the amount of taxes, interests, and surcharges due from the taxpayer, whichever is higher.

In the case of People v. PCLC, CTA Crim. Case No. 172-178, it is said that “knowledge of a taxpayer’s obligation” to file the required return and voluntary failure to comply therewith in a manner required by law will suffice in proving willfulness. In attempting to cover up the failure to comply with its tax obligations, the mindset of willfulness, as opposed to mere inadvertence, is established. As settled by the Supreme Court, the under declaration or failure to declare true and actual income for several consecutive years is an indication to cheat the Government of its taxes. What more if there has been no declaration at all? This will therefore lead to the conclusion that the taxpayer willfully failed to make and filed the required returns and pay taxes thereon with the intent to deprive the Government of taxes it is due

[This Article is whole heartedly dedicated to my best friend and my little brother, Atty. Farley, who will finally submit to the sacrament of matrimony, as he is destined to walk down the aisle with the love of his life. May your being ONE with her be pleasant, enjoyable and fruitful. Also, I am happy and honored to be your best man! As the old adage tells us: A real man chooses to honor, love, respect, adore and be faithful to one woman and remember: happy is the man who finds a true friend, and far happier is he who finds that true friend in his wife. In deed, you are a real man my little brother! Congratulations, best wishes and God bless!!!]  

In Roman 12:19, it is written – Do not avenge yourselves, beloved, but leave room for God’s wrath. For it is written: “Vengeance is Mine; I will repay, says the Lord.”  William Shakespeare articulated that: “Talkers are not good doers”.  Jean De La Fontaine emitted: “A hungry stomach cannot hear”.  John Dryden voiced that: “Who think too little & who talk too much”. George Herbert expressed that: “Show me a liar and I’ll show you a thief”. Willian Penn stated that: “The public must and will be served”.  Matthew Henry aired that: “After a storm comes a calm”.  And my idol, the great John Lennon intoned that: “You may say I’m a dreamer. But I’m not the only one”.

In Commercial Law parlance, it is elementary that a corporation has a personality distinct and separate from its individual stockholders or members. In fact, even the Civil Code states that a juridical person such as a corporation, the law grants a juridical personality, separate and distinct from that of each shareholder, partner, or member. Simply put, a corporation regarded as a person is different and has a personality distinct from the persons composing it. Thus, e.g. the property of the corporation is not the property of the stockholders.

Parenthetically, a corporation being a juridical person is regarded by law with a personality normally possessed by an individual and is known to be as an artificial being or person. While a corporation is treated as a person, unlike human beings, it does not have any physical existence. It exists only by legal fiction. A corporation exists only because the law says so. Its existence is abstract, theoretical, intangible, or its physical existence is just all in the minds. It is invisible and exists only because the law so provides. However still, a corporation is regarded as a person, an artificial being because of its attributes. [See The Revised Corporation Law, Illustrated and Simplified, A Guide to Passing the Bar, 2020 Edition, by Atty. JLChavez, Jr.] In this view, therefore, corporate affairs, businesses, contracts and transactions, its assets, can only be managed and represented by the persons composing it. In a stock corporation, it is the board of directors manifested through board resolutions.

It is also settled that although a corporation has a personality separate and distinct from those of its stockholders, directors, or officers, such separate and distinct personality is merely a fiction created by law for the sake of convenience and to promote the ends of justice. The corporate personality may be disregarded, and the individuals composing the corporation will be treated as individuals if the corporate entity is being used as a cloak or cover for fraud or illegality as a justification for a wrong, as an alter ego, an adjunct, or a business conduit for the sole benefit of the stockholders. 

In a long line of cases decided by the Supreme Court, the formulation of the doctrine of piercing the corporate veil is that:

a. When the separate and distinct corporate personality defeats public convenience, as when the corporate fiction is used as a vehicle for the evasion of an existing obligation; 

b. In fraud cases, or when the corporate entity is used to justify a wrong, protect fraud, or defend a crime; or 

c. Is used in alter ego cases, i.e., where a corporation is essentially a farce since it is a mere alter ego or business conduit of a person, or where the corporation is so organized and controlled and its affairs so conducted as to make it merely an instrumentality, agency, conduit or adjunct of another corporation. 

Simply put, the separate juridical personality of a corporation will be disregarded when the wrongdoing is clearly and convincingly established. And as such, the obligations incurred by the corporation, acting through its directors, officers and employees, are no longer its sole liabilities. When the veil of the corporate fiction is pierced, the directors, officers and employees are solidarily liable. And in proper cases, the corporate officer cannot protect himself behind a corporation where he is the actual, present and efficient actor. Simply put again, the culprit cannot hide behind the cloak of the separate corporate personality of the corporation to escape criminal liability.

[This Article is whole heartedly dedicated to my Mother who recently celebrated her 70^th birthday, healthy and happy. This alone proves that God is with us! Again, Happy Birthday!!! Truly you are a heaven-sent. Caring, thoughtful, responsible, loving, supportive, motivator and yet all these words are not enough to describe who you are, how you guided us, how you kept us through, how you raised us to be better and to be God-fearing. (Of course, this is alongside with Mr. Josephrally Sr.) May you remain a good example to the four corners of the world, worthy of emulation of being a mother, a wife, a sister, and a friend. I am also proud that you have served our government with all honesty and integrity. Stay home, stay safe and God Bless my beloved Mother!]

For I tell you the truth, you give to Caesar what is due to Caesar, and to God what belongs to God. [Matthew 22:21] This was Jesus’ response to the Pharisees’ trap when asked as to the permissibility of paying taxes to Caesar. In the movie “The Untouchables”, Al Capone famously said that “you can get more with a kind word and a gun than with a kind word alone”. But when it came to catching him, all it took was a diligent and skilled forensic accounting. Simply put, and as it became an old adage, “Only an accountant could catch Al Capone”. This holds true despite the fact that Al Capone was a known gangster who dominated organized crime in Chicago. Capone happened to be indicted of assault, murder by gunning down rivals, became a crime czar, running gambling, prostitution but went unpunished. But when his wealth ballooned to almost $100 million, he was charged with federal tax evasion and was found guilty. He was convicted and sentenced to 11 years of federal prison.

In this relation, Michiavelli on The Prince, he said, “That he who abandons what is done for what is ought to be done, will rather bring about his own ruin than his preservation”. Marcus Aurelius uttered that: For all things soon pass away and become a mere tale, and complete oblivion soon buries them. Napoleon Hill pronounced that: Big pay and little responsibility are circumstances seldom found together. Rick Warren verbalized that: Leadership starts with understanding responsibility, not ability. Leadership is a stewardship, not a show.

In accounting parlance, there is a principle called “full disclosure” where one is duty-bound to include in an entity’s financial statements and its related supporting documents all information necessary that would affect a reader’s understanding of those statements and documents. Any deviation in this principle is well within the bailiwick of the auditor, one who conducts audits & reviews in accordance with specific laws or rules. However, when it comes to government funds and property, owned or held in trust by, or pertaining to the Government, or any of its subdivisions, agencies, or instrumentalities, the Commission on Audit shall have the power, authority, and duty to examine, audit, and settle all accounts pertaining to the revenue and receipts of, and expenditures or uses of funds and property, owned or held in trust by, or pertaining to, the Government, or any of its subdivisions, agencies, or instrumentalities

COA shall have the exclusive authority, subject to the limitations in the Constitution, to define the scope of its audit and examination, establish the techniques and methods required therefor, and promulgate accounting and auditing rules and regulations, including those for the prevention and disallowance of irregular, unnecessary, excessive, extravagant, or unconscionable expenditures or uses of government funds and properties.

On the other hand, the Bureau of Internal Revenue shall be under the supervision and control of the Department of Finance and its powers and duties shall comprehend the assessment and collection of all national internal revenue taxes, fees, and charges, and the enforcement of all forfeitures, penalties and fines connected therewith, including the execution of judgments in all cases decided in its favor by the Court of Tax Appeals and the ordinary courts. The Bureau shall give effect to and administer the supervisory and police powers conferred to it by this Code or other laws.

While COA concerns its audit on the propriety of government expenditures, the Administrative Code provides that every expenditure or obligation authorized or incurred in violation of the provisions of this Code or of the general and special provisions contained in the annual General or other Appropriations Act shall be void. Every payment made in violation of said provisions shall be illegal and every official or employee authorizing or making such payment, or taking part therein, and every person receiving such payment shall be jointly and severally liable to the Government for the full amount so paid or received. Likewise, PD 1177 provides that any official or employee of the Government knowingly incurring any obligation, or authorizing any expenditure in violation of the provisions herein, or taking part therein, shall be dismissed from the service, after due notice and hearing by the duly authorized appointing official. If the appointing official is other than the President and should he fail to remove such official or employee, the President may exercise the power of removal. 

Parenthetically, browsing upon the Government Auditing Code of the Philippines (PD 1445), it states that the head of any agency of the government is immediately and primarily responsible for all government funds and property pertaining to his agency and persons entrusted with the possession or custody of the funds or property under the agency head shall be immediately responsible to him, without prejudice to the liability of either party to the government.

The participation of these public officers, such as those who approve or certify unlawful expenditures, vis-a-vis the incurrence of civil liability is recognized by the COA in its issuances, beginning from COA Circular No. 81-15654. 

It is also settled that the Constitution vests the broadest latitude in the COA in discharging its role as the guardian of public funds and properties. In recognition of such constitutional empowerment, the Court has generally sustained the COA’s decisions or resolutions in deference to its expertise in the implementation of the laws it has been entrusted to enforce. In this relation,  the Constitution has an entire Article focused on Public Accountability. Article XI, section 1 enshrines that “Public office is a public trust. Public officers and employees must, at all times, be accountable to the people, serve them with utmost responsibility, integrity, loyalty, and efficiency; act with patriotism and justice, and lead modest lives.”

NOW, if all these seem to be inoperable, inadequate, ineffectual, unavailing and unsuccessful, invoke the Al Capone Doctrine. That is, seize, catch, indict and convict the gangster(s) in the government using the might and fortitude of the Bureau of Internal Revenue. The Tax Code empowers the Commissioner to obtain information and to summon/examine and take the testimony of persons. In fact, the Commissioner is also authorized to file the necessary civil and criminal cases. He can even suspend and/or shutdown businesses, in proper cases, can inquire into the bank deposit account and other related information held by financial institutions. Significantly, the Commissioner can even confiscate and forfeit proceeds or instruments of crime, or value of goods, and instruments or tools with which the crime was committed.

[This Article is humbly dedicated to Dean George Erwin Garcia of Pamantasan ng Lungsod ng Maynila, College of Law, an exceptional and superb boss, an icon, a respectable comrade, a first-rate and the best election lawyer in the Philippine archipelago. Mabuhay ka Dean George at Maligayang Kaarawan sayo Dean Boss!]

In life, there are only two (2) things which are certain, death and taxes. And above all, almost everything of something, if not something of everything has tax consequence. But is there really an escape to pay taxes? Under the Civil Code of Philippines, it provides for the sources of an obligation. Among others, an obligation exists because the law says so. Such an obligation is a juridical necessity to give, to do or not to do. Corollary, the fact that one is bound by an obligation, adherence must be made with respect to the period. In layman’s term, that is the due date or deadline. 

This column will focus on the obligation of the individual taxpayers to file their annual income tax return. While the wish of the mind and the desire of the heart is tax exemption, full exemption whenever applicable, the filing of the income tax return is another. To simplify, its all about 5 W’s and 1 H, the What?, When?, Who?, Where?, Why?, and How?

What is an income tax return? It is a BIR form either in paper or electronic form containing the taxpayer’s profile and information, total gross sales, receipts or income from compensation for services rendered, conduct of trade or business or the exercise of a profession, except income subject to final tax, the allowable deductions, the taxable income, the income tax due and payable of the said taxpayer.

When is the deadline for filing income tax return? The return must be filed on or before the fifteenth (15^th) day of April of each year covering income for the preceding taxable year. SIMPLY PUT, it is on April 15, following the close of the taxable year. E.g. If the taxable year is 2020, the return must be filed on or before 15^th day of April 2021. Parenthetically, the BIR Commissioner may, in meritorious cases, grant reasonable extension of time for filing the income tax return.

Who are required to file the income tax return? Every resident citizen, non-resident citizen, resident alien, non-resident alien engaged in trade or business, citizen of the Philippines and any alien individual engaged in business or practice of profession within the Philippines regardless of the amount of gross income and individual deriving compensation concurrently from two or more employers at any time during the taxable year and married individuals who do not derive income purely from compensation.

Who are exempt or not required to file income tax return? An individual whose taxable income does not exceed P250,000.00, pure compensation income earner, one whose sole income has been subjected to final withholding tax and the minimum wage earner.

Where to file the income tax return? Except where the BIR Commissioner otherwise permits, it shall be filed with an authorized agent bank, Revenue District Officer, Collection Agent or duly authorized Treasurer of the city or municipality in which such person has his legal residence or principal place of business in the Philippines, or if there be no legal residence or place of business in the Philippines, with the Office of the Commissioner. Above all, the taxpayer must file his income tax return where he is registered. The exception is via eFPS or eBIRForms platform.

How to file the income tax return? Under the “pay-as-you-file” system, the total amount of tax imposed by the National Internal Revenue Code must be paid at the time the income tax return is filed. The income tax return can be filed manually or electronically.

How to pay the income taxes due? It can be done either manually or ePay/online. [RMO 42-2020] 

How to file the income tax return manually? Either using the pre-printed BIR form or via eBIRForms, pay and file the income tax due. The use of eBIRForms is not mandatory. Only taxpayers which are covered by RR No. 6-2014 are required or mandated to file electronically. Likewise, MSME or Micro Small Medium Enterprise, Senior Citizen or Person with Disabilities may still avail of manual filing.

How to file the income tax return electronically? First, the taxpayer must enroll for the use of the online eFPS or eBIRForms system as detailed under RMO 24-2013 by accessing the BIR website www.bir.gov.ph, complete the Enrollment Page Form then click the SUBMIT button. Second, download the Offline eBIRForms Package, install, select the form and fill-up the data of the return, validate and/or edit then click final copy. Third, go online and then SUBMIT the accomplished income tax return to eFPS or online eBIRForms. Finally, there will appear a Filing Reference Number (FRN) for this purpose as acknowledgment of its receipt. In cases where attachments are required, the printed copy of the income tax return with Filing Reference Number (FRN) Page and the necessary attachments must be submitted to the concerned RDO, LTDO or LT Office within 15 days therof.

eBIRForms simply means the Electronic Bureau of Internal Revenue Forms facility where the submitting and filing of all tax returns are done electronically. RR No. 5-2015 provides for the imposition of penalties for failure to file returns under electronic platform of the BIR by taxpayers covered by eFPS and eBIRForms. As to individuals, RR 6-2009 provides that the top 5,000 individual taxpayers are mandated to enroll, file, and pay tax returns using the eFPS (Electronic Filing Payment System). Finally, a penalty of P1,000.00 will be imposed for failure to file the income tax return using eFPS or eBIRForms tantamount wrong venue filing plus civil penalties of 25% of the amount due in accordance with Section 248 (A) of the Tax Code. Late payment of the income tax due will incur 12% interest per annum, and a compromise penalty, on top of the income tax due.

How to pay the income taxes due if the filing is done electronically? Once the FINAL COPY is clicked, this copy is for submission to the BIR. For taxpayers enrolled with eBIRForms, type username and password for the income tax return to be eFiled and an email notification will be generated as proof that the return has been duly received by the BIR. Then proceed to ePay/online payment or manually pay the income taxes due. For taxpayers not enrolled with eBIRForms, after completing the the income tax returns Offline eBIRForms and click the FINAL COPY, the system will ask if the filing will be online. The ePay of the BIR provides ePayment Channels of Authorized Agent Banks that taxpayers can access for the electronic payment of their income tax dues. ePayment Channels accept tax payments through the use of either online, credit, debit, prepaid cards and mobile payments.

How to pay the income taxes due if the filing is done manually? In paying the income tax due for the returns using eBIRForms, simply present to the Authorized Agent Bank the printed copy of the income tax return duly signed and the Email notification of successful e-Filing, then pay the income tax due. If not via eBIRForms, use the manual return and pay accordingly. RR 16-2002 provides for the modes of payment to Authorized Agent Banks. It includes: Over-the-counter cash payment not exceeding P10,000.00, bank debit system or check payment system.

Is installment of payment allowed? Yes. When the tax due is in excess of P2,000.00, the taxpayer may elect to pay the tax in two (2) equal installments, in which case, the first installment must be paid at the time the return is filed and the second installment on or before October 15 following the close of the calendar year, otherwise the whole amount of the tax unpaid becomes due and payable together with the delinquency penalties.

SIMPLY PUT and as to WHY pay taxes? It is the lifeblood of the nation. Without taxes, no government can survive. That is why, despite natural reluctance to surrender a very very hard earned income, everyone must contribute in giving life to the government. And in return, WE can expect both tangible and intangible benefits not only in enhancing and improving the life of the Filipino people but ancillary to it is the time-honored principle of due process and equal protection and the real wish of the mind and desire of the heart, Justice and Progress or simply JP. [This Article is dedicated to my good friend JP who is set to undergo a quintuple by-pass operation at the Philippine Hear Center this 6 March 2021. All my and our prayers to you my good friend! As it is written: Trust in the Lord with all your heart and lean not on your own understanding, in all your ways submit to him, and he will make your paths straight. God is a rewarder of those who diligently seek Him. Finally, the Lord is a God of justice, blessed are those who wait for him. As I too, believe in God, I am confident that we can still play tennis (singles) after this!] 

Gold there is, and rubies in abundance, but lips that speak knowledge are a rare jewel [Proverbs 20:15]. Who is wise and understanding among you? Let them show it by their good life, by deed done in humility that comes from wisdom [James 3:13]. In Matthew 9:13, it is written “But go and learn”. Aristotle once said. “The roots of education are bitter, but the fruits are sweet”. Nelson Mandela uttered: “Education is the most powerful weapon which you can use to change the world”. Mahatma Gandhi pronounced that: “Live as if you were to die tomorrow. Learn as if you were to live forever”. Martin Luther, King Jr., articulated that: “Intelligence plus character, that is the goal of true education”. Benjamin Franklin expressed that: “An investment in knowledge always pays the best interest”.

Kobe Bryant believed that: ”If you’re afraid to fail, then’ you’re probably going to fail”. Roger Federer once exclaimed that: “As long as you are breathing, it’s never too late to start a new beginning. Hard work, dedication and pure motivation makes you who you are and will become”. Tony Blair verbalized that: Education is the best economic policy there is”. With this, I remember my old man, my DAD, my idol (a tough act to follow): having had sculpted on the walls of our dwelling that: “It is better to endure the hardship of learning than to taste the bitterness of ignorance”, where everybody could see it, anytime and almost all of the time.

As to our government, even the drafters of our Constitution recognized and acclaimed the importance of education. And by its mandate, they granted tax exemptions and privileges favoring the creation and operation of educational institutions. The Congress as well respected educational institutions by drafting laws granting exemptions. E.g. The Local Government Code and The National Internal Revenue Code. [See The New Tax Code of the Philippines, For Practitioners, Entreprenuers and Bar Candidates, 2018 Edition, By: Atty. JLChavez, Jr.,]

Under the Constitution [Art. XIV, Sec. 4(3)], all revenues and assets of a non-stock, non-profit educational institutions used actually, directly, and exclusively for educational purposes shall be exempt from taxes and duties. Simply put, a non-stock, non-profit school [NSNPS for brevity] is exempt from income tax.

Likewise, under the same supreme law of the land [Art. VI, Sec. 28(3)], it is also exempt from real property tax. This real property tax exemption is also inscribed in Section 234(b) of the Local Government Code.

Notably however, Section 21 of the Tax Code provides for seven (7) internal revenue taxes. These are: income tax, estate and donor’s tax; VAT, other percentage taxes; excise taxes; documentary stamp taxes and other taxes as are imposed and collected by the BIR.

Let us talk about this blow by blow. Firstly, NSNPS is exempt from income tax. The Supreme Court ruled that the last paragraph of Section 30 of the Tax Code which imposes tax on income of whatever kind and character of a NSNPS from any of their properties, real or personal, or from any of their activities conducted for profit x x x… does not apply. And for the constitutional exemption to be enjoyed, jurisprudence and tax rulings affirm the doctrinal rule that there are only two requisites: (1) The school must be non-stock and non-profit; and (2) The income is actually, directly and exclusively used for educational purposes. There are no other conditions and limitations. [CIR vs. St. Paul College Makati [G.R. No. 215383, 8 March 2017] Likewise, RMC 44-206 (dated 25 July 2016) seeks to exclude NSNPS from the coverage of RMO 20-2013, which mandates the filing of an application for Tax Exemption Ruling (TER) by all tax exempt entities. However, under the said circular the NSNPS are required to submit certain documents for the purpose of applying a tax exemption certificate. [See Income Taxation Illustrated and Simplified, A Guide to Passing the Bar, 2019 Edition, Volume 1, By: Atty. JLChavez, Jr.,]

With this, once a the NSNPS is granted an exempt-status by the BIR, the Tax Exemption Rulings or Certificate of Tax Exemption remains valid and effective, unless recalled for valid grounds. The NSNPS is not required to renew or revalidate the Tax Exemption Rulings previously issued to them. [Caveat: The Certificate of Tax Exemption is a non-negotiable instrument. See Negotiable Instruments Law Simplified A Guide to Passing the Bar, 2015 Edition, Volume 3, By: Atty. JLChavez, Jr.,]

Secondly, a NSNPS is not liable for estate tax as the same applies only to natural persons. The estate tax is levied, assessed, collected and paid only upon the the transfer of net estate left behind by a decedent [Sec. 84]. As to donor’s tax, if the NSNPS is the donor, the donation is exempt from donor’s tax if it is in compliance with Section 101 of the Tax Code.

Thirdly, as to VAT, a NSNPS is exempt by virtue of Section 109 (H). Note that the exemption refers to output VAT. Meaning, there is no VAT liability, it has no VAT payable. However, with respect to its purchases, Section 105 of the Tax Code is clear, it is liable to pay input VAT on its purchases and importations. And it cannot claim a refund or credit for that matter. E.g. In its acquisition of school supplies and equipment, it cannot invoke exemption on the imposition of 12% VAT passed on to them (the NSNPS) by the seller. It will just form part of the purchase price or acquisition cost which may eventually be amortized by way of depreciation. [See Transfer Taxes, VAT & Remedies Illustrated and Simplified, A Guide to Passing the Bar, 2020 Edition, Volume 2, By: Atty. JLChavez, Jr.,]

Fourthly, with respect to other percentage taxes and excise taxes, a NSNPS is also exempt. The Tax Code does not provide impositions on these taxes.

Fifthly, while DST is in the nature of an excise tax, a NSNPS is not exempt therefrom. As long as the documents and papers are not exempted under Section 199 of the Tax code, then it is liable for DST. E.g. In obtaining loans, in the issuance of certificates and diplomas, a NSNPS must pay the DST.

Lastly, as to other taxes imposed and collected by the BIR, e.g. The withholding tax on compensation. While the NSNPS has a juridical personality separate and distinct from the persons composing it, the nature of its tax liability is by way of withholding agent. While the payor-employee is the taxpayer to whom the tax is imposed on their income, the withholding agent or the NSNPS-employer simply acts as an agent of the BIR to ensure the collection of taxes. However, the Tax Code [Sec. 57] makes the NSNPS-employer, the agent, personally liable in case it failed to remit the withholding tax on compensation due from its employees. Its liability emanates from the breach of its legal duty to remit the tax to the BIR. But in case of failure to withhold, the agent is liable only on account of its negligence to withhold. The duty to pay the income tax on compensation still rests with the taxpayer, the employee. The reason is simple, it is the employee who earned income.

But is a NSNPS exempt from BIR audit or investigation? NO. The BIR Commissioner is empowered to obtain information, and to summon, examine and take testimony of persons, [Sec. 5] and conduct inventory-taking, surveillance and to prescribe presumptive gross sales and receipts [Sec. 6]. The objective is not to make an assessment and thereupon determine the tax liability of the NSNPS. This is merely to determine compliance that in truth and in fact, the assets and revenues of a non-stock, non-profit educational institution are actually, directly and exclusively used for educational purposes. That, the NSNPS is beyond doubt and based on best evidence obtainable an educational institution, incorporated as a non-stock, non-profit entity, paying no dividends, governed by trustees who receive no compensation, and devoting all its income to the accomplishment and promotion of the purposes enumerated in its Articles of Incorporation, in case of dissolution, its assets should proceed to another non-stock entity with similar purpose and that its administrative expenses must not exceed 30%. [See The New Corporation Law Illustrated and Simplified, A Guide to Passing the Bar, 2020 Edition, Volume 4, By: Atty. JLChavez, Jr.,]

SIMPLY PUT, a NSNPS with the exception of DST is exempt from internal revenue taxes and real property tax. [This Article is crafted as prayed for by a Priest who is dear to my heart, in reverence to my Alma Mater, San Sebastian College-Recoletos, dedicated to the OAR Family and an endowment to the very same priest who gave me a Ukelele on my wedding day for me to sing SOMETHING by the Beatles on that very special day parallel to Paul McCartney’s version. Happy Birthday Rev. Fr. William C. Villaflor, OAR, aka Fr. Wing. BRAVO BASTE!!!]

Feel free to email me for any question at atty.jlc@gmail.com

Coverage

The Estate Tax Amnesty under RA No. 11213 covers the estate of decedents who died on or before December 31, 2017, with or without assessments duly issued, whose estate taxes have remained unpaid or have accrued as of December 31, 2017. [Sec. 4]

However, the Estate Tax Amnesty does not extend to estate tax cases which shall have become final and executory and to properties involved in cases pending in appropriate courts: (a) Falling under the jurisdiction of the Presidential Commission on Good Government; (b) Involving unexplained or unlawfully acquired wealth under Republic Act No. 3019, otherwise known as the Anti-Graft and Corrupt Practices Act, and Republic Act No. 7080 or An Act Defining and Penalizing the Crime of Plunder; (c) Involving violations of Republic Act No. 9160, otherwise known as the Anti-Money Laundering Act, as amended; (d) Involving tax evasion and other criminal offenses under Chapter II of Title X of the National Internal Revenue Code of 1997, as amended; and, (e) Involving felonies of frauds, illegal exactions and transactions, and malversation of public funds and property under Chapters III and IV of Title VII of the Revised Penal Code. [Sec. 9]

Entitlement Under Estate Tax Amnesty

The estate may enjoy the immunities and privileges of the Estate Tax Amnesty, to wit: (1) Pay an estate amnesty tax at the rate of six percent (6%) based on the decedent’s total net estate at the time of death; (2) If an estate tax return was previously filed with the Bureau of Internal Revenue, the estate tax rate of six percent (6%) shall be based on net undeclared estate; (3) The provisions of the National Internal Revenue Code of 1997, as amended, or the applicable estate tax laws prevailing at the time of death of the decedent, on valuation, manner of computation, and other related matters shall apply suppletorily, at the time of the entitlement; (4) If the allowable deductions applicable at the time of death of the decedent exceed the value of the gross estate, the heirs, executors, or administrators may avail of the benefits of tax amnesty and pay the minimum estate amnesty tax of Five thousand pesos (₱5,000). [Sec. 5]

Simply put, in no case shall the estate tax due be lower than P5,000. In other words, the minimum estate tax amnesty for the transfer of the estate for each decedent is P5,000.

Availment of the Estate Tax Amnesty; When and Where to File and Pay

The executor or administrator of the estate, or if there is no executor or administrator appointed, the legal heirs, transferees or beneficiaries, who wish to avail of the Estate Tax Amnesty are mandated to:

1. Period: Within two (2) years from the effectivity of the Implementing Rules and Regulations (RR 6-2019) – which must be within 2 years from 15 June 2019 or until 15 June 2021, all application for estate amnesty must be filed;
2. Place of filing: File with the Revenue District Office of the Bureau of Internal Revenue, which has jurisdiction over the last residence of the decedent, a sworn Estate Tax Amnesty Return, in such forms as may be prescribed in the Implementing Rules and Regulations;
3. Manner of payment: The payment of the amnesty tax shall be made at the time the Return is filed;
4. Nonresident decedents: The Estate Tax Amnesty Return shall be filed and the corresponding amnesty tax be paid at Revenue District Office No. 39, or any other Revenue District Office which shall be indicated in the Implementing Rules and Regulations.

If the estate involved has properties which are still in the name of another decedent or donor, the present holder, heirs, executors or administrators thereof shall only file one (1) Estate Tax Amnesty Return [ETAR BIR Form No. 2118-EA] and pay the corresponding estate amnesty tax thereon based on the total net estate at the time of death of the last decedent covering all accrued taxes under the National Internal Revenue Code of 1997, as amended, arising from the transfer of such estate from all prior decedents or donors through which the property or properties comprising the estate shall pass:

The appropriate Revenue District Officer shall issue and endorse an acceptance payment form, in such form as may be prescribed in the Implementing Rules and Regulations of this Act for the authorized agent bank, or in the absence thereof, the revenue collection agent or municipal treasurer concerned, to accept the tax amnesty payment. Proof of settlement of the estate, whether judicial or extrajudicial, shall likewise be attached to said Return in order to verify the mode of transfer and the proper recipients:

The availment of the Estate Tax Amnesty and the issuance of the corresponding Acceptance Payment Form do not imply any admission of criminal, civil or administrative liability on the part of the availing estate. [Sec. 6]

Presumption of Correctness of the Estate Tax Amnesty Returns

The Estate Tax Amnesty Returns shall be conclusively presumed as true, correct, and final upon filing thereof, and shall be deemed complete upon full payment of the amount due.

The Acceptance Payment Form, and the Estate Tax Amnesty Return shall be submitted to the Revenue District Office after complete payment. The completion of these requirements shall be deemed full compliance with the provisions of this Act. A Certificate of Availment of the Estate Tax Amnesty shall be issued by the Bureau of Internal Revenue within fifteen (15) calendar days from submission to the Bureau of Internal Revenue of the Acceptance Payment Form and the Estate Tax Amnesty Return. Otherwise, the duplicate copies of the Acceptance Payment Form, stamped as received, and the Estate Tax Amnesty Return shall be deemed as sufficient proof of availment. [Sec. 7]

However, under RR 6-2019 (29 May 2019) provides that the duly accomplished and sworn ETAR, and Acceptance Payment Form (APF) BIR Form No. 0621-EA, together with the complete documents as enumerated in the ETAR, shall be presented to the concerned RDO for endorsement of the APF prior to the payment of the estate tax amnesty with the AABs or RCOs. Note that, only the duly endorsed APF shall be presented to and received by the AAB or RCO. In this regard, RMC 103-2019 dated 25 September 09 prescribes the Revised ETAR & Certificate of Availment. On the other hand, RMC 102-2019 dated 25 September 2019, provides certain clarifications on filing ETAR  before the RDO having jurisdiction over the last residence of the decedent in case there are several properties. [See also, RMC 68-2019 dated 1 July 2019 as to who is qualified to avail the ETA under RA no. 11213 and RMC 33-2019 dated 27 June 2019 as to the guidelines and procedures in availing ETA]

Immunities and Privileges

Estates covered by the Estate Tax Amnesty, which have fully complied with all the conditions set forth in this Act, including the payment of the estate amnesty tax shall be immune from the payment of all estate taxes, as well as any increments and additions thereto, arising from the failure to pay any and all estate taxes for taxable year 2017 and prior years, and from all appurtenant civil, criminal, and administrative cases and penalties under the National Internal Revenue Code of 1997, as amended.

Without prejudice to compliance with applicable laws on succession as a mode of transfer, the Bureau of Internal Revenue, in coordination with the applicable regulatory agencies, shall set up a system enabling the transfer of title over properties to heirs and/or beneficiaries and cash withdrawals from the bank accounts of the decedent, when applicable.

Upon full compliance with all the conditions and payment of the corresponding estate amnesty tax, the tax amnesty granted shall become final and irrevocable. [Sec. 8]

Importance of Payment of Estate Tax

The Registers of Deeds shall not register in the Registry of Property unless the tax had been paid, to wit:

1. Any document transferring real property or real rights therein or

2. Any chattel mortgage, by way of gifts inter vivos or mortis causa, legacy or inheritance, unless a certification from the Commissioner that the transfer tax and actually due thereon had been paid is shown, and they shall immediately notify the Commissioner, Regional Director, Revenue District Officer, or Revenue Collection Officer or Treasurer of the city or municipality where their offices are located. [Sec. 95, NIRC]

SIMPLY PUT, no estate tax payment, the BIR will not issue the e-CAR (Electronic Certificate of Authority to Register), which is the primary document needed before the Register of Deeds process and/or transfer the title over the real property to the respective heirs. For detailed discussion on estate tax, see Transfer Taxes, VAT and Remedies Illustrated and Simplified, 2020 Edition – Volume II, A Guide to Passing the Bar, By: Atty. JLChavez, Jr. [This Article is implored by my good friend – Mabs]

Feel free to email me for any question at atty.jlc@gmail.com

Did you know that on 3 August 2017, a law was enacted increasing the penalties against hospitals and clinics for their refusal, denial, or rejection to administer or accept patients for appropriate medical treatment on an emergency or serious cases unless a corresponding deposit is made?

RA No. 10932 otherwise known as the Anti-Hospital Deposit Law, amending Batas Pambansa 702, as amended by RA No. 8344, prohibits the demand of deposits or advance payments for the confinement or treatment of patients in hospitals and medical clinics in certain cases.

Coverage

In an emergency or serious cases, it is now unlawful for any proprietor, president, director, manager or any other officer and/or medical practitioner or employee of a hospital or medical clinic to request, solicit, demand or accept any deposit or any other form of advance payment as a prerequisite for administering basic emergency care to any patient, confinement or medical treatment of a patient in such hospital or medical clinic or to refuse to administer medical treatment and support as dictated by the good practice of medicine to prevent death, or permanent disability, or in the case of a pregnant woman, permanent injury or loss of her unborn child, or noninstitutional delivery. [Sec. 1]

The only excuse for this matter is by reason of inadequacy of the medical capabilities of the hospital or medical clinic. However, the law still requires that the attending physician may transfer the patient to a facility where the appropriate care can be given, after the patient or his next of kin consents to said transfer and after the receiving hospital or medical clinic agrees to the transfer.

And when the patient is unconscious, incapable of giving consent and/or unaccompanied, the physician can transfer the patient even without his consent. But, such transfer shall be done only after necessary emergency treatment and support have been administered to stabilize the patient and after it has been established that such transfer entails less risks than the patient’s continued confinement. In this case, no hospital or clinic, after being informed of the medical indications for such transfer, shall refuse to receive the patient nor demand from the patient or his next of kin any deposit or advance payment.

Only upon strict compliance of the foregoing transfer procedure makes the refusal not punishable under the law.

Emergency situation, in this case, connotes an objective finding of a medical officer on duty for the day that there is immediate danger and where delay in initial support and treatment may cause loss of life or cause permanent disability to the patient, or in the case of a pregnant woman, permanent injury or loss of her unborn child, or would result in a noninstitutional delivery. On the other hand, a serious case refers to a condition of a patient characterized by gravity or danger wherein based on the objective findings of a prudent medical officer on duty for the day when left unattended to, may cause loss of life or cause permanent disability to the patient, or in the case of a pregnant woman, permanent injury or loss of her unborn child. [A classic example is: a COVID-19 patient]

Penalty

If this law is violated by any official, medical practitioner or employee of the hospital or medical clinic, upon conviction by final judgment, they will be punished by imprisonment 6 months and 1 day but not more than 2 years and 4 months, or a fine of not less than ₱100,000.00, but not more than ₱300,000.00 or both, at the discretion of the court.

If such violation was committed pursuant to an established policy of the hospital or clinic or upon the instruction of its management, the director or officer of such hospital or clinic responsible for the formulation and implementation of such policy shall, upon conviction by final judgment, suffer imprisonment of 4 to 6 years, or a fine of not less than ₱500,000.00, but not more than ₱1,000,000.00 or both, at the discretion of the court, without prejudice to damages that may be awarded to the patient-complainant.

And upon 3 repeated violations committed pursuant to an established policy of the hospital or clinic or upon the instruction of its management, the health facility’s license to operate shall be revoked by the DOH. The president, chairman, the board of directors, or trustees, and other officers of the health facility shall be solidarily liable for damages that may be awarded by the court to the patient-complainant. [Sec. 4]

Presumption of Liability

In the event of death, permanent disability, serious impairment of the health condition of the patient-complainant, or in the case of a pregnant woman, permanent injury or loss of her unborn child, proceeding from the denial of his or her admission to a health facility pursuant to a policy or practice of demanding deposits or advance payments for confinement or treatment, a presumption of liability shall arise against the hospital, medical clinic, and the official, medical practitioner, or employee involved. [Sec. 5]

PhilHealth Reimbursement of Basic Emergency Care

PhilHealth is mandated to reimburse the cost of basic emergency care and transportation services incurred by the hospital or medical clinic for the emergency medical services given to poor and indigent patients. Furthermore, the Philippine Charity Sweepstakes Office (PCSO) is bound to provide medical assistance for the basic emergency care needs of the poor and marginalized groups. [Sec. 7]

Tax Implication

Other expenses incurred by the hospital or medical clinic in providing basic emergency care to poor and indigent patients not reimbursed by PhilHealth is tax deductible. [Sec. 8]

Under DOH AO 2018-0012 dated 5 April 2018, basic emergency care to poor and indigent patients provided by the hospital or medical clinic not reimbursed by PhilHealth and PCSO shall be deductible from gross sales/receipts. [BIR RMC 39-2019]

SIMPLY PUT, the tax incentives granted to hospitals or medical clinics by way of deductible expense from the gross income or, the tax deduction is allowed only when the patients are poor and indigents, and that the hospital or medical clinic expenses covering the basic emergency care were not reimbursed by Philhealth or PCSO. Notably, however, the law in imposing prohibition on advance-deposits applies to all as it did not distinguish the patient as long as it is a serious case or an emergency and one’s life is in peril. But as to tax implication, consistent with the time-honored principle of stricssimi juris, the patient has to be poor and indigent in order for the expenses to be considered deductible.  [This Article is penned to salute my good friend – Atty. VBTF]

Feel free to email me for any question at atty.jlc@gmail.com

Place of Filing of ITR

Except in cases where the Commissioner otherwise permits, the return shall be filed with the following: Authorized agent bank, revenue district officer, collection agent or duly authorized Treasurer of the city or municipality. And the venue of filing may either be at: Taxpayer’s legal residence, principal place of business in the Philippines, or, if there be no legal residence or place of business in the Philippines, with the Office of the Commissioner. [Sec. 51(B), NIRC]

Modes of Payments to Authorized Agent Banks

Aside from the electronic payment system currently used by some taxpayers in paying their BIR taxes, the rest shall pay their tax liabilities through any of the following modes: Over-the-counter cash payment; bank debit system and checks.

In the issuance and accomplishment of checks for the payment of internal revenue taxes, the taxpayer shall indicate the space provided for “pay to the order of” the following data: Presenting/collecting bank or the bank where the payment is to be coursed; and, FAO (For the Account Of) Bureau of Internal Revenue as payee; and, under the “Account Name” the taxpayer identification number (TIN) [Sec. 3, RR 16-2002]

Disallowed Checks for Tax Payments

The following checks are not acceptable as check payments for internal revenue taxes: Accommodation checks, second endorsed checks, stale checks, postdated checks, unsigned checks and, checks with alteration or erasures.

Likewise, the BIR mandates the AABs accepting checks for the payment of taxes and other charges to see to it that the check covers one tax type for one return period only. Moreover, AABs must strictly comply with the system and procedures for the reception, processing, clearing and accounting of the checks prescribed under a separate regulation. Second indorsement of checks which are payable to the BIR or CIR is absolutely prohibited.

Note that taxpayers are not required to enroll with any AAB where they intend to file tax returns/payment forms and/or pay internal revenue taxes. Taxpayers may file tax returns/payment forms and pay internal revenue taxes with any AAB of the appropriate BIR office (RDO), (LTDO), or LTS, etc., whichever is applicable, where they are required to file the particular return/payment form. [RR 16-2002] For detailed discussion, see the Book of Atty. JLChavez, Jr., on Income Taxation Illustrated and Simplified Volume I, 2019 Edition.

But in this time of COVID-19, the BIR under RMC No. 43-2020 (dated 15 April 2020), provides that in order to ease for concerned taxpayers in their filing of returns and payment of taxes due during Enhanced Community Quarantine, the taxpayers may file the tax return and pay the internal revenue tax during such period: (1) At the nearest Authorized Agent Banks (AABs), notwithstanding RDO jurisdiction or, (2) file and  pay the corresponding tax due thereon to the concerned Revenue Collection Officers (RCOs of the nearest Revenue District Office (RDO), even in areas where there are AABs.

However, payment of internal revenue taxes in cash should not exceed P20,000, while those for check payment will have no limitation if the same is made with the RCO in the district office during the ECQ period. Also, all checks shall be made payable to the Bureau of Internal Revenue (with or without “IFO Name and TIN of the Taxpayer” written on the check as previously required) and that the name of the receiving AAB Branch may no longer be indicated in the check for tax payment.

Noteworthy, under RMC 48-2020 which was issued by the BIR on 22 May 2020, the Circular extends until 14 June 2020 the leniency of filing of returns and payment of taxes under RMC 43-2020, and to include payment of Amnesty Tax.

SIMPLY PUT, the strict rules on the place of payment, or the territorial jurisdiction for payment of internal revenue taxes are relaxed under the aforementioned circular. Otherwise, the taxpayers can be held guilty of wrong venue filing or filing of tax returns at a different RDO than they were duly registered. And will be subjected to a penalty of P1,000 per return and 25% surcharge of the tax due paid. [RR 5-2015, BIR OM No. 2016-04-01, dated 13 April 2016] Note: This article is enthused by my big brother – The Boss/Atty.RT

An income or any inflows into the hands of the taxpayer other than a mere return of capital may either be a taxable income, an exclusion, or tax-exempt. What about separation pay?

Any amount received by an official or employee or by his heirs from the employer as a consequence of the separation of such official or employee from the service of the employer because of, namely: death, sickness, other physical disability, or for any cause beyond the control of the said official or employee is excluded from gross income, meaning not taxable. [Sec. 32(B)(6)(b), NIRC]

The above provision refers to any amount received by an official or employee or by his heirs from the employer due to death, sickness or other physical disability or for any cause beyond the control of the said official or employee, such as retrenchment, redundancy, or cessation of business.

The phrase “for any cause beyond the control of the said official or employee” connotes involuntariness on the part of the official or employee. The separation from the service of the official or employee must not be asked for or initiated by him. The separation was not of his own making. Whether or not the separation is beyond the control of the official or employee, being essentially a question of fact, shall be determined on the basis of prevailing facts and circumstances. It shall be duly established by the employer by competent evidence which should be attached to the monthly return for the period in which the amount paid due to the involuntary separation was made.

Amounts received by reason of involuntary separation remain exempt from income tax even if the official or the employee, at the time of separation, had rendered less than ten (10) years of service and/or is below fifty (50) years of age.

Any payment made by an employer to an employee on account of dismissal, constitutes compensation regardless of whether the employer is legally bound by contract, statute, or otherwise, to make such payment. [Sec. 2.78.1(B)(b), RR No. 2-98]

SIMPLY PUT, separation pay on account of COVID-19 is tax-exempt. This holds true whether the employee was given separation pay by reason of his death, sickness, physical disability, or the employer engaged or utilized a retrenchment, labor-saving device or separation program because of the devastating, shattering, the dreadful, ruinous, damaging and injurious effect of COVID-19, not to mention its financial impact on the part of the employer. All told, these are causes beyond the control of the employee and the Tax Code is unequivocal and unambiguous on this matter.

Parenthetically, the employer is burdened to prove in deed that the cause of separation is sanctioned by the Tax Code, specifically on: “due to other causes beyond the control of the employee”.

Under BIR RMO 66-2016 dated 6 December 2016, Revenue Memorandum Order (RMO) No. 26-2011, as amended by RMO 36-2011, this Order is being issued to further amend RMO No. 26-2011 by devolving also to the Revenue District Office or appropriate Large Taxpayer (LT) Office where the employer has registered the processing of requests for tax exemption of separation benefits received by an officer or employee as a consequence of separation from employment due to other causes beyond the control of said official or employee, such as, but not limited to, retrenchment, redundancy, installation of labor-saving devices and closure of a business. [Sec. 1] The ruling, will thus confirm that the amounts received by the employee or by his heirs from the employer by reasons of death, sickness or other physical disability are exempt from income tax.

And in order to facilitate the processing of requests for tax exemption of separation benefits received by officials/employees or his/her heirs as a result of their separation from employment due to death, sickness or other physical disability or for any cause beyond the control of said officials or employees, regardless of age and length of service, RMO 66-2016 provides certain documentary requirements. [Sec. 2] 

The ruling for tax exemption serves as a protection on the part of the employer once an audit or investigation is conducted by the BIR. On the part of the employee, he or she can enjoy the separation pay in full, tax-free. Caveat, separation pay and retirement pay are not synonymous with one another. [Note: This article is inspired by my little brother – FCS]

Donation in its simplest term is an act of generosity, big-heartedness, or a charity at that. Legally speaking, it is the act of liberality whereby a person disposes gratuitously of a thing or right in favor of another, who accepts it. On the other hand, the Tax Code grants authority to the Bureau of Internal Revenue to collect the donor’s tax.

Basically, the purpose of imposing a donor’s tax is to raise revenue so that the government can defray the necessary and legitimate expenses of the country. Further, donor’s tax is imposed to complement or augment estate tax since there is a loss of revenue collection anticipated when the subject of inheritance or the estate is split by donation prior to the time of death. While this tax-saving device is legally allowed, the basic purpose is to prevent at least the nonpayment of the related tax. So, if one is to escape estate tax on a gratuitous transfer, the donor’s tax will set in.

Under TRAIN, the rate of donor’s tax is simplified from a graduated tax rates of 2% to 15%, now, a fixed rate of 6%.

But are all kinds of donations subject to tax? Should a donor, by his act of generosity, having a big heart and a champion of charitable works be burdened by tax liabilities? Whether an individual or juridical person, should the imposition need not distinguish? And thereafter, is not the donor entitled to a certain benefit or tax courtesy for that matter?

In these trying times, COVID-19 or pandemic epoch, the Filipino Bayanihan spirit has once again illustrated the fighting chutzpah and solidarity of the nation. While taxes are obligations arising from law, what then really, are the tax obligations both of the donor and the done in this case?

Regardless of who the recipient or the donee is, with no distinction, the amount of P250,000 donation is donor’s tax-exempt. The exemption is granted on every first P250,000 of every donation made on a cumulative basis by the same donor during the calendar year;

A total or full exemption on donor’s tax is granted on gifts or donation made to or for the use of the National Government or any entity created by any of its agencies which is not conducted for profit, or to any political subdivision of the said Government [with no condition] and gifts in favor of an educational and/or charitable, religious, cultural or social welfare corporation, institution, accredited nongovernment organization, trust or philanthropic organization or research institution or organization are likewise exempt from donor’s tax with a few conditions provided under the Tax Code.

Simply put, as long as the donee is one of the aforementioned, there is no burden on the part of the donor to pay the tax.

Noteworthy, the donor while not asking anything in return from the government despite the gift, the help or the donation extended, there is a corresponding tax benefit under the Tax Code. The wisdom is to encourage these acts of liberality even prior to this COVID-19. It is a form of tax incentive where the donor can claim such by way of tax deduction or a deductible expense from its gross income.

Contributions or gifts actually paid or made within the taxable year to, or for the use of the Government of the Philippines or any of its agencies or any political subdivision thereof exclusively for public purposes, or to accredited domestic corporation or associations organized and operated exclusively for religious, charitable, scientific, youth and sports development, cultural or educational purposes or for the rehabilitation of veterans, or to social welfare institutions, or to non-government organizations is deductible.

And the good news is, the deduction is allowed in full. Why? The Tax Code is explicit on this.

Donations to the Government of the Philippines or to any of its agencies or political subdivisions, including fully-owned government corporations, exclusively to finance, to provide for, or to be used in undertaking priority activities in education, health, youth, and sports development, human settlements, science and culture, and in economic development are contributions considered as deductible in full. Even those donations made to an accredited nongovernment organization are deductible in full.

This is even bolstered by Revenue Regulations 9-2020, issued on 6 April 2020 acknowledging the private sector in responding to the heed of the government’s call in the fight against COVID-19. The Regulation authorizes the full deductibility of the donation against the gross income of the donor-corporation/individual which may include cash, donations of all critical or needed healthcare equipment or supplies, relief goods and use of property, whether real or personal. The requirements or supporting documents are very simple. Just the deed of donation and the certificate of donation (BIR Form 2322).

Donations to private hospitals and/or non-stock non-profit educational and/or charitable, religious, cultural or social welfare corporation, institution, foundation, NGOs (even if non-accredited), trust or philanthropic organization and/or research institution or organization and local private corporations, civic organizations/institutions are given the same full tax deductibility under the Regulation. It only requires the President of the donor-Corporation or any of its authorized officers, or by the donor-individual himself, stating the name of the done, the date and amount of donation and stating that it was made solely for the purpose of supporting the efforts to fight COVID-19 during the period of the state of national emergency together with the proof of purchase if the donation is in kind.

Finally, the donations of all critical or needed healthcare equipment or supplies and relief goods like food packs, rice, canned goods, noodles etc., are not to be treated as transactions deemed sale subject to VAT under Section 106(B) of the NIRC. And that, any input VAT attributable to such purchase of goods is creditable against any other output tax.