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IT’S school time once again! As always, this school year offers all the new things: new teachers, new classmates, new books, and, of course, one glaring difference: new methods of learning.
Despite all efforts to offer different methods of accessible and inclusive learning during these times of social distancing, latest data from the Department of Education (DepEd) showed a decline in overall enrollment in basic education this school year. This may be attributed mainly to lack of access to technology required for remote learning.
This prompted several private institutions and individuals to donate learning equipment as a way to help public school teachers and students cope with this new normal. In recognition of these generous efforts, Republic Act 11494, otherwise known as the “Bayanihan to Recover As One Act” (Bayanihan 2), has mandated tax incentives on donations of equipment in favor of public schools.
The Bureau of Internal Revenue (BIR), through Revenue Regulation (RR) 26-2020, implemented the provisions of Section 4 (zzz) of Bayanihan 2, which grants tax exemption on donations of personal computers, laptops, tablets or similar equipment (i.e., mobile phones, printers) for use in teaching and learning in public schools, including state universities and colleges (SUCs) and vocational institutions under the Technical Education and Skill Development Authority (TESDA), regardless of school level.
Under Section 4 (zzz) of Bayanihan Act 2 and RR 26-2020, donations made from Sept. 15, 2020 to Dec. 19, 2020 shall be entitled to the following tax privileges:
Deduction from gross income of the amount of contribution/ donation, subject to limitations and conditions stated in Section 34 (H) of the Tax Code and to the following conditions:
The deed of donation shall indicate in detail the items donated, the quantity/ number, and the amount/value of the donation.
The deduction shall be availed of in the taxable year in which the expenses were paid or incurred.
The donation must be substantiated with sufficient evidence (i.e ., sales invoice/s, delivery receipts, and other adequate records), indicating the following information:
Amount of expenses claimed as deductions Proof or acknowledgement of receipt of the donated property by the recipient public school Exemption from donor’s tax of gifts given to the national government or any entity created by any of its agencies not conducted for profit, and educational institutions, provided that no more than 30 percent of the gifts given to educational institutions shall be used for administrative purposes
Foreign donations and importation of learning equipment by DepEd, the Commission on Higher Education ( CHed), or TESDA shall be exempt from value-added tax (VAT). If the importer/consignee is other than the agencies previously mentioned, it should present a deed of donation duly accepted by the abovementioned agencies, in order for the imported equipment to be exempt from VAT.
In addition, the imported equipment shall not be subjected to the issuance of Authority to Release Imported Goods (ATRIG) under Revenue Memorandum Order 35-2002. Hence, the Bureau of Customs (BoC) may release the equipment without the need for ATRIG. The BIR may, however, conduct a post-audit investigation in relation to goods released by the BoC without any ATRIG.
Local donations of personal computers, laptops, tablets or similar equipment that were originally intended for sale by the donor shall not be treated as a transaction deemed as a sale that is subject to VAT under Section 106 (B) (1) of the Tax Code, as amended. Moreover, input tax attributable to the purchase of donated personal computers, laptops, tablets or similar equipment not previously claimed as input tax shall be creditable against any output tax of the donor.
The above rules also apply to donations made by economic zone locators to the abovementioned agencies.
For purposes of valuation, the amount of donation to be claimed for tax incentives should be based on actual acquisition cost for new equipment purchased. For used equipment, the amount of donation should be based on the depreciated value.
Finally, no prior determination or ruling shall be required by the BIR for purposes of availing of the tax incentives prescribed under RR 26-2020.
Undoubtedly, the coronavirus disease 2019 pandemic has affected every aspect of our lives. The usual challenges that come with teaching and learning have been compounded by the current need to social distance, to not gather in large groups. The struggles of our academic community to adjust are no secret, but we are fortunate that so many kind souls — individuals and organizations — are pitching in to help ease learners and teachers into the next normal. Let us hope this support continues and that it inspires our educators to provide quality education to young Filipinos all over the country, despite the difficulties of the time.
The author is a senior manager with the Tax and Corporate Services Co ., a member of the De lo it te Asia PacificNetwork. For comments or questions, email jsudario@ deloitte.com. Deloitte Asia PacificLtd. is a company limited by guarantee and a member firmof Deloitte Touche Tohmatsu Ltd. Members of Deloitte Asia Pacific Ltd. and their related entities, each of which are separate and independent legal entities, provide services from more than 100 cities across the region, including Auckland, Bangkok, Beijing, Hanoi, Ho Chi Minh City, Hong Kong, Jakarta, Kuala Lumpur, Manila, Melbourne, Osaka, Seoul, Shanghai, Singapore, Sydney, Taipei, TokyoandYangon.