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Tax Alert No. 82 [Revenue Regulations (RR) No. 26-2020 dated 6 October 2020]

20 Oct 2020

Implementing Section 4 (zzz) of Republic Act No. 11494 (Bayanihan to Recover as One Act) relative to Donations of Identified Equipment for Use in Public Schools 

The Secretary of Finance, through the recommendation of the Commissioner of Internal Revenue, has issued RR No. 26-2020 to implement Section 4 (zzz) of Republic Act No. 11494, entitling the donor/s of personal computers, laptops, tablets, or similar equipment such as mobile phone or printer for use in teaching and learning in public schools to the following tax incentives:

  1. Deduction from gross income of the amount of donation subject to the following limitations and conditions:
    • Those stated under Section 34 (H) of the Tax Code;
    • Deed of Donation shall indicate in detail the items donated, its quantity/number and the amount/value of donation;
    • Deduction shall be availed of in the taxable year in which the expenses have been paid or incurred; and
    • Substantiation with sufficient evidence covering the amount of expenses being claimed as deduction and proof or acknowledgement of receipt of the donated property by the recipient.
  2. Exemption from payment of donor’s tax.
  3. In case of foreign donation, value-added Tax (VAT)-exempt importation of personal computers, laptops, tablets or similar equipment by the Department of Education (DepEd), Commission on Higher Education (CHED) or TESDA. In case the importer/consignee is other than these agencies, the importation may still be VAT-exempt, provided that the importer presents a Deed of Donation duly accepted by the said agencies. The imported goods covered may be released by the Bureau of Customs without the need of an Authority to Release Imported Goods (ATRIG). The BIR may conduct a post investigation audit on the importations released without ATRIG.
  4. Local donation of personal computers, laptops, tablets or similar equipment which are originally intended for sale or for use in the business by the donor shall not be treated as a transaction deemed sale subject to (VAT). Any input VAT attributable to the purchase of these donated articles not previously claimed as input tax shall be creditable against any output VAT.

These rules also apply to donations made by ECOZONE locators to the government agencies mentioned. No prior determination or ruling by the Bureau of Internal Revenue is required for the availment of these tax incentives.

The amount of the donation shall be based on the actual acquisition cost of the donated articles and also considering their depreciated value, in case they had already been used.

The regulation is effective immediately upon its publication in Malaya Business Insight on 8 October 2020.

You may access the full version of the regulations through the BIR website.

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Lyn Golez-Geronan

Tax Librarian, PwC Philippines

Tel: +63 (2) 8845 2728 Ext. 2054

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