BIR Ruling [DA-070-04]

February 12, 2004 BIR RULING [DA-070-04] 101 (A) (3) DA-18-98 Follosco Morallos & Herce Suite 1506, 15th Floor, 88 Corporate Center 141 Valero Street corner Sedeno Street Salcedo Village, Makati City Attention: Atty. Rachel P. Follosco Gentlemen : This refers to your letter dated November 21, 2003 requesting on behalf of your client University of Negros Occidental-Recoletos, Incorporated (UNO-R, Inc.), for a confirmation of your opinion that donation and grant of usufructuary rights without pecuniary consideration is exempt from donor's tax prescribed under Section 98 of the Tax Code of 1997, in view of the provisions of Section 101 of the same Tax Code. It is represented that UNO-R is a non-stock, non-profit educational corporation duly organized under Philippine laws; that UNO-R, Inc. was primarily organized to continue the objectives, operations, and programs of the present UNO-R which is owned by El Superior de la Corporation Filipina de Padres Agustinos Recoletos, Inc., a corporation sole duly registered under Philippine law; that this is in connection with the implementation of the decision of Recoletos Inc. to spin-off the activities relating to its schools/colleges; that the accreditations/government recognitions/licenses of UNO-R issued by the Department of Education Culture and Sports have been assigned/transferred to UNO-R, Inc. pursuant to DECS approval dated 30 September 2003; that the transfer of the licenses and recognitions issued to UNO-R, Inc. by the Commission on Higher Education is still in process; that for UNO-R to have the resources to be able to continue/assume the operations and programs of UNO-R, Inc., and thereby pursue the goal of Recoletos, Inc. to support a Catholic educational institution that offers students quality Christian community oriented education, Recoletos Inc. executed the following: 1) A Deed of Donation Pursuant to said Deed, Recoletos, Inc. donated certain assets that are presently being used actually and directly by the present UNO-R for educational purposes. 2) Grant of Usufructuary Rights Pursuant to the Grant, Recoletos Inc. gives UNO-R, Inc. full use, possession, and enjoyment of buildings and the lots on which said school building and related structures are located, which presently constitutes the UNO-R campus. UNO-R, Inc. shall have no obligation to pay any fee or rent, provided said real properties subject of the Grant are preserved at the expense of UNO-R, Inc. and used for educational purposes as well as the other activities in the pursuit of the objectives of UNO-R, Inc. The Grant is for a term of five (5) years renewable every five (5) years thereafter. In reply, please be informed that inasmuch as the donee is an educational institution, the aforementioned donation is exempt from the payment of donor's tax pursuant to Section 101(A)(3) of the Tax Code of 1997, subject to the condition that not more than 30% of said gift shall be used for administration purposes. SDATEc Moreover, the aforesaid Deed of Donation is not subject to documentary stamp tax prescribed under Section 196 of the Tax Code of 1997, but only to the documentary stamp tax of P15.00 imposed under Section 188 of the same Code. (BIR Ruling No. DA-18-98 dated January 29, 1998) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service