A little over a month ago, I was in the car stuck in traffic when I heard the President announce the local community quarantine. I remember suddenly becoming stressed over whether we had enough to tide us over for the period of the quarantine. My grocery run normally coincides with payday, thus, I knew that there was almost nothing at home. I also became concerned over whether I had enough maintenance medicines to cover the quarantine period. There was a lot of anxiety in the days following the announcement of the quarantine which has since progressed into an enhanced community quarantine (ECQ). Eventually, I calmed down and through the help of many people, I was able to put together supplies needed for the lockdown period. It’s understandable to be anxious because these are uncertain times and we do not know what to expect.

In the same manner that I was gripped with anxiety on the personal level, I also felt a lot of apprehension over the tax deadlines. As a tax practitioner, I knew that my clients will be affected by the ECQ since most of them followed a calendar year basis with an April 15 income tax filing deadline. Aside from the income tax filing, there were also other deadlines falling within the ECQ. Many clients were in the process of finalizing their audited financial statements so timelines would definitely be affected by the ECQ. Thankfully, our government listened to the clamor of the taxpayers and issued regulations extending the tax deadlines. In fact, many other issuances were released by Bureau of Internal Revenue (BIR) and Department of Finance (DoF) to address different tax issues. Aside from extending deadlines for regular tax filing for different tax types whose deadlines fell within the ECQ, there were also issuances on the extension of deadlines for submission of documents relating to tax audits, tax treaty relief, and prescription.

About 2 weeks ago, the announcement of the extension of the ECQ coincided with the issuance of the DOF and BIR of Revenue Regulations No. 9-2020 (RR 9-2020) on the deductibility of donations to purposely address the fight against the Corona Virus Disease 2019 or the COVID19. Of course, the former has nothing to do with the latter. Nevertheless, I appreciate how our government issued these regulations in reaction to the overwhelming response of the private sector to help our government in fighting the disease.

One of the highlights of RR 9-2020 is the full deductibility of certain donations given for the sole and exclusive purpose of combatting COVID19 during the state of national emergency under Republic Act 11469 or the Bayanihan to Heal as One Act. Specifically, donations of the following:

• Cash;
• all critical or needed healthcare equipment or supplies;
• Relief goods such as, but not limited to, food packs (rice, canned goods, noodles, etc.) and water
• Use of property, whether real or personal (shuttle service, use of lots/buildings); made by donor corporations and donor individuals will be entitled to full deductibility, subject to certain conditions.

In a nutshell, the conditions consist of the following:

First, the donations should be made to the National Government or any of its instrumentalities and political subdivisions, including fully owned government corporations, or to accredited non-stock non-profit educational and/or charitable, religious, cultural or social welfare corporation, institution, foundation, non-government organization and/or research institution or organization.

Second, the donation should be made for the sole purpose of combatting COVID19.

Third, while the notice of donation is dispensed with, there must be compliance with the required documentary requirements, such as a deed of donation, certificate of donations and other supporting documents enumerated in the regulations.

Finally, the donation must be made during the state of national emergency.

The Tax Code provides for exemption from donor’s tax on donations made to the National Government and non-government organizations. However, RR 9-2020 also exempts from donor’s tax donations made to the following:

• Private hospitals and/or non-stock non-profit educations 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; and
• Local private corporations, civic organizations/institutions provided said entities, directly and exclusively distribute and/or transfer donations to and/or partner as conduit or logistical machinery with, accredited NGOs and/or National government or any of its instrumentalities or political subdivisions

Thus, aside from donor’s tax exemption, full deductibility of the donation shall also be granted subject to the timely submission of documentary requirements for such donations.  The documentary requirements include, on the part of the donee, a BIR prescribed liquidation report, and on the part of the donor, a BIR prescribed sworn certification, BIR registered acknowledgment receipt or an acknowledgment receipt in the BIR required template issued by the ultimate beneficiary, certificate of donation (BIR Form 2322), and proof of purchase (for donations in kind). Said documents should be submitted to the respective Revenue District Office (RDO) of the donor and donee within 60 days of the lifting of the ECQ.

The regulations also provide that donations of medical equipment or relief goods shall not be treated as deemed sale transactions subject to VAT. This seems to apply to sellers of medical supplies or relief goods who donate such medical equipment and relief goods from their existing inventory.

Furthermore, any input VAT attributable to such purchase of goods shall be creditable against any other output VAT. Hence, does this mean that any VAT taxpayer who purchases medical equipment or relief goods for donation to the recognized donees in the regulations, are entitled to claim input VAT generated from such purchases against their output VAT liability? This seems to be the case based on the language of the regulations.

The grant of tax incentives provided under RR 9-2020 are subject to the usual verification procedures of the BIR in the form of a tax audit or investigation, to verify compliance with the conditions set forth in the regulations.

By issuing the regulations, the government gives due recognition to those in the private sector who have made invaluable assistance. It also gives further impetus to others who want to help in battling COVID19. In the spirit of true bayanihan, many have already extended assistance without even expecting returns in the form of tax incentives or relief.

_{Kathleen L. Saga is a Principal from the Tax Group of KPMG R.G. Manabat & Co. (KPMG RGM&Co.), the Philippine member firm of KPMG International. KPMG RGM&Co. has been recognized as a Tier 1 tax practice and Tier 1 transfer pricing practice by the International Tax Review.}

_{This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity.}

_{The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG International or KPMG RGM&Co. For comments or inquiries, please email ph-inquiry@kpmg.com or rgmanabat@kpmg.com}