Tuesday, July 29, 2014

Overseas Donations Related Laws and Regulations

Philippine laws and regulations allow tax and duty exemption privileges for certain donations from overseas.

1. The Tariff and Customs Code of the Philippines (Presidential Decree No. 1464), as amended, provides for exemption from the payment of import duties for the following items:

a. "Imported articles donated to, or for the account of, any duly registered relief organization, not operated for profit, for free distribution among the needy." A certification by the Department of Social Welfare and Development (DSWD) or the Department of Education (DepEd), as the case may be, is required. [Section 105 (I)]

b. Books and publications certified by DepEd as intended for economic, technical, vocational, scientific, philosophical, historical, or cultural purposes, or those covered by the International Agreement on Importation of Educational Scientific and Cultural Materials or other agreements binding upon the Philippines [Section 105 (s)]. Included in this exemption are bibles, missals, prayer books, Koran, Ahadith and other religious books of similar nature.

c. Those privileges that may be granted by the President of the Philippines upon the recommendation of the National Economic and Development Authority in the interest of the national economic development. [Last paragraph of Section 105]

d. Those items granted to government agencies, instrumentalities or government-owned or controlled corporations under the provisions of existing contracts, commitments, agreements, or obligations (requiring such exemptions) with foreign countries. [Last paragraph of Section 105]

2. Section 109 (y) of the National Internal Revenue Code of 1997 exempts from the value added-tax the "sale, importation, printing or publication of books and any newspaper, magazine, review or bulletin which appears at regular intervals with fixed prices for the subscription and sale and which is not devoted principally to the publication of paid advertisements."

3. Presidential Memorandum Order No. 36, s. 1992 also authorizes the "importation and donation of food, medicine and equipment for the use in the government relief and rehabilitation programs for calamity affected areas'. Endorsement would be required from the Department of Social Welfare and Development for relief items, the Department of Health for medicines, the Department of National Defense for rehabilitation equipment. The Office of the President issues the necessary clearances for donations under this facility, which will serve as basis for the Bureau of Customs to process and release the donation.

4. Diplomatic Notes 1071 of the US Embassy and No. 3001 of the Department of Foreign Affairs provide that the Philippine government will accord duty-free entry into the Philippines, as well as exemption from internal taxation, of supplies of goods approved by the US government, donated to or purchased by the United States voluntary, nonprofit relief and rehabilitation agencies qualified under United States government regulations, and consigned to such organizations, including branches of these agencies in the Philippines which have been approved by the Philippine government.

5. Article XIV Section 4(4) of the Philippine Constitution provides that "subject to conditions prescribed by law, all grants, endowments, donations, or contributions used actually, directly, and exclusively for educational purposes shall be exempt from tax."

CONDITIONS FOR DUTY-FREE ENTRY

Donations from abroad may qualify for duty-free exemption depending on the following conditions (Annex A):

1. The specified donee/consignee or recipient must be qualified to receive donations on a tax or duty free basis.

2. The items to be donated may be recommended for duty-free provided they are:

a. Directly required or necessary in the religious, charity, medical or training activities of the donee/consignee, and should contribute to the promotion of rural or regional development, generation of employment, strengthening of health services or moral values, and other socio-economic development;

b. Essential machinery and equipment, including its spare parts and accessories, as defined under NEDA Rules and Regulations;

c. Not contraband, prohibited, regulated or restricted under existing laws (i.e., motor vehicles, clothing, tires), except those necessary for the promotion of public health and safety; and

d. Not locally available and with no local substitutes as certified by the Board of Investments. However, in case of local availability, the importation may still be recommended for duty-free treatment if it satisfies the foregoing conditions, in addition to which the BOI should interpose no objection to granting of duty free exemption.

Note: Certification for duty-free exemption is made on a per shipment basis to ensure that each request satisfies the policy guidelines of NEDA.


QUALIFIED TYPES OF DONATION AND RECIPIENTS

• Computers and other similar Information Technology products.

Qualified Recipients

a. Educational and training institutions registered with appropriate Philippine governments agencies;

b. Educational, scientific, and cultural institutions or societies, and similar organizations duly approved by the Department of Education and UNESCO.

• Books, including magazines, newspapers, and other periodicals that are educational (economic, technical, vocational, scientific, philosophical, historical, cultural, or religious) in nature;

Educational, scientific, and cultural materials covered by international agreements or commitments binding upon the Philippine government and so certified by the Department of Education;


Bibles, missals, prayer books, Koran, Ahadith, and other religious books of similar nature and extracts therefrom, hymnal and hymns for religious use;

Qualified Recipients:

a. Educational, scientific, and cultural institutions or societies, and similar organizations duly approved by competent authorities such as DepEd and United Nations Educational, Scientific and Cultural Organization (UNESCO) National Commission of the Philippines.

b. Scientific foundations

c. Cultural societies

d. Government agencies


• Drugs, medicines and other pharmaceuticals having similar preparations registered with the Bureau of Food and Drugs (BFAD)

Qualified Recipients:

a. Government hospitals duly registered and licensed to operate by DOH as provided for in the Republic Act 4226 or the Hospital Licensure Act;

b. Private primary and secondary hospitals duly registered and licensed to operate by the Bureau of Health Facilities and Services - DOH as provided for in Republic Act 4226;

c. Medical/Relief dispensing organizations/agencies registered and/or accredited by the DSWD and registered with the SEC (DSWD Administrative Order No. 19, series of 2002)


• Food and non-food products/relief items for free distribution to the needy

Relief items include: Food and non-food items, except used clothing, that are responsive to any situation affecting disadvantaged or distressed individuals and families in order to meet their basic needs (i.e., canned or packed food items, medicine, blankets, towels, evacuation tents, tarpaulins, bunk beds, etc.)

Qualified Recipients:

Welfare/relief dispensing organizations / agencies registered, licensed or accredited by the DSWD.


• Heavy equipment or machineries used for construction, improvement, repair and maintenance of roads, bridges, and other infrastructure projects, including garbage trucks, fire trucks and other similar equipment.

Note: Vehicle should be left hand drive and not more than ten years old.

Qualified Recipients:

Local government units, including provinces, cities, municipalities and barrios.


• Medical equipment and machinery including spare parts and accessories

Qualified Recipients:

a. Government hospitals duly registered and licensed to operate by DOH as provided for in the Republic Act 4226 or the Hospital Licensure Act;

b. Private primary and secondary hospitals duly registered and licensed to operate by the DOH as provided for in Republic Act 4226;


• Scientific instruments or apparatus intended exclusively for educational purposes or pure scientific research; articles for the blind; and visual and auditory materials and works of art and collectors' pieces of educational, scientific, and cultural character pursuant to the Florence Educational Scientific and Cultural Agreement adopted by the General Conference of UNESCO at Florence, Italy in 1950;

Qualified Recipients

Educational, scientific, and cultural institutions or societies, and similar organizations duly approved by the competent authorities such as DepEd and United Nations Educational, Scientific and Cultural Organization (UNESCO) National Commission of the Philippines.


REQUIRED DOCUMENTS

The following documents are required when requesting for duty-free certification for incoming donations from overseas:

1. From the donor

• Deed of donation duly authenticated by the Philippine Embassy or Consulate;

• Itemized list of donations (also referred to as packing list or inventory of donated items). If medicines are included in the shipment, kindly submit the itemized list of drugs and quantity to be donated indicating brand/generic name, dosage forms/strengths, batch/lot number, name and address of the manufacturer, and expiration date of at least one (1) year upon receipt); and

• Proforma invoice or commercial invoice (not required for used items); and

• Shipping documents (bill of lading or airway bill). The original copy will be needed by the consignee/local counterpart in processing the release of donation.

Important: The name listed as donee/consignee or recipient in the Deed of Donation must be the same as that appearing in the shipping documents.


2. From the donee/consignee or recipient

• Letter or request for duty-free certification for the donation addressed either to the Department of Finance (DOF) or the National Economic and Development Authority (NEDA);

• Duly notarized Deed of Acceptance of the Donation;

• Distribution plan for the donation;

• Copy of SEC registration and Articles of Incorporation and/or By-Laws, in case of non-stock, non-profit charitable or religious institutions requesting for exemption from payment of duties for the first time;

• DSWD License to Operate and Certification of Accreditation, if non-government organization;

• Current and valid DOH License to Operate, if hospital.


ADDITIONAL REQUIREMENTS

The following additional documents would be needed depending on the nature and type of donation:

1. For essential machinery and equipment

• Product catalogue and/or technical description of products to be donated

• Certificate of registration for cooperatives or NACIDA-registered firms

• Endorsement of the Board of Investments

2. For books, magazines, newspapers and other periodicals

• Packing list indicating titles of books and publications

• Authority of representative (in lieu of donee);

• Duly notarized affidavit and Deed of Undertaking indicating that the donated articles shall be used actually, directly and exclusively for educational purposes and shall not be resold or transferred for material consideration; and

• Endorsement of the Mabuhay Lane, Department of Finance.

3. For computer equipment and other educational scientific, and cultural materials

• Deed of Undertaking indicating that the donated articles shall be used actually, directly and exclusively for educational purposes and shall not be resold or transferred for material consideration;

• DepEd accreditation, if the recipient is an educational institution;

• UNESCO endorsement, if the recipient is a non-government organization; and

• Copy of BIR certificate, and international agreement or executive order allowing tax-exempt privileges, if applicable.

4. For medicines

• Distribution plan for medicines;

• Letter to the DOH-Bureau of International Health Cooperation (DOH-BIHC) requesting endorsement to BFAD for the issuance of clearance.

The letter request should be submitted with the complete list of drugs and quantity to be donated, with the following information:

- Generic name/brand name

- Formulation (with English translation)

- Dosage forms. Strengths

- Batch / lot number and expiration date (shelf life of at least 1 year upon arrival in the Philippines)

- Name and address of the manufacturer

• BFAD Certificate of Product Registration (CPR)

Note: The recipient or donee/consignee will need to coordinate with BFAD for the inspection and collection of Lab Analysis prior to the issuance of the CPR or accelerated CPR.


5. For medical equipment capable of emitting radiation, such x-ray and ultrasound equipment;

• Letter to the DOH-BIHC requesting endorsements to the Bureau of Health Devices and Technology (BHDT) for the issuance of clearance. This document must be submitted with the following:

- Complete operation, instruction and service manual regarding the equipment model

- For x-ray equipment, a copy of the license to operate an x-ray facility issued by the BHDT

- Name(s) and credentials of the person(s) who will operate the equipment

• An import fee of P165.00 per unit of radiation emission devices will be paid to the BHDT upon approval of clearance.

6. For food and other items

• Duly notarized distribution plan, confirmed by the local Social Welfare and Development Office and endorsed by the DSWD Field Office which will provide technical assistance on the utilization of specific shipment;

• Duly notarized distribution report on previous shipment (if any);

• Prior agreed/approved arrangements with DSWD Regional Office concerned on items other than food, medicines, and relief items;

• Letter to the DOH-BIHC requesting endorsement to BFAD for the issuance of clearance. The request is submitted with the complete list of food items and quantity to be donated, with expiration date of at least (1 year) upon arrival in the Philippines.

• BFAD Certificate of Product Registration (CPR).


FILING OF APPLICATION

The donee/consignee or recipient files a letter of request for duty-free importation either with the NEDA or the DOF. The NEDA processes, evaluates, and endorses requests for duty free importation for machinery and equipment. The DOF processes, evaluates, and endorses requests for duty-free importation of relief goods (medicines, food, among others) intended for DSWD accredited and licensed non-government organizations, as well as books, publications, and education-related materials / equipment.

The letter to NEDA is addressed to:

The Director

Trade, Industry, and Utility Staff

National Economic and Development Authority

NEDA sa Pasig, 12 Blessed Josemaria Escriva Drive,

Ortigas Center, Pasig City

The letter to DOF is addressed to:

The Secretary

Department of Finance

Attention: Revenue Operations Group

DOF Bldg., Roxas Blvd., Manila

Important: For books and publications, the letter to DOF must be addressed to the Secretary of Finance (Attention: Mabuhay Lane)

Requirements for the Availment of Duty Exemption

for Donations from Overseas

requirement_exemption

RELEASE OF DONATION

Upon receipt of the endorsement by the agency concerned for the duty-free certification on the donation, the DOF issues the appropriate clearance and forwards the same to the Central Records Division, Bureau of Customs (BOC) by official messenger. A duplicate copy of the DOF clearance may be furnished to the donee/consignee of recipient upon request.

The Tax Exempt Division of the BOC endorses the release of donation and forwards this document to the Informal Entry Division of the District Office concerned (South Harbor, MICP, NAIA, etc.). The Informal Entry Division checks/verifies, appraises and examines the donated shipment.

After completing the documentation and payment of processing fees and charges (i.e., terminal handling fee, stripping and stuffing fee, arrastre/wharfage, among others), the Bureau of Customs releases the shipment to the donee/consignee or its authorized representative. Processing for the release of donation at the Bureau of Customs usually takes about two to three (2-3) working days if all the requirements are complete.

Important: Donations, even if accorded duty free privilege, are still subject to Value-Added Tax (VAT), which is computed at 12% of the landed cost of the shipment.

Computation for Duties:

Declared Value + Freight + Insurance = Dutiable Value

Dutiable Value x Rate of Duty= Duties

Rate of Duty (% determined by the B

Computation of Taxes:

Dutiable Value + Duties = Landed Cost

Landed Cost (12% VAT) = Taxes