Salvador Guevara & Associates

March 4, 2008 BIR RULING [DA-120-08] Secs. 101 (A) (3), 188; BIR Ruling No. DA-422-04; DA-531-06 Salvador Guevara & Associates 815-816 Tower One & Exchange Plaza, Ayala Triangle, Ayala Avenue, 1226 Makati City Attention: Atty. Edmundo P. Guevarra Rabiev Tobias M. Racho Marie Cherylle Z. Hular Legal Counsels Gentlemen/Madam : This refers to your letter dated February 15, 2008 requesting, on behalf of your client, The Felicidad T. Sy Foundation, Inc. (the "Foundation") , confirmation of your opinion that donations made to the foundation are exempt from donor's tax and documentary stamp tax under Sections 101 and 175 of the Tax Code of 1997, as amended. It is represented that the Foundation is still in the process of incorporation with the Securities and Exchange Commission (SEC); that the Foundation will be a non-stock non-profit charitable corporation; that, as stated in its draft Articles of Incorporation, the purposes for which it is being organized are as follows: 1. To promote the general well being and economic development of those who are less privileged by undertaking charitable and philanthropic work or activities, and to support or give grants, legacies, donations, contributions, endowments, and financial assistance to the Catholic church, and any other religious and charitable institutions, and/or to any of the latter's projects or activities; 2. To undertake community development and livelihood projects designed to improve the quality of life of those who are less fortunate; 3. To provide financial assistance to charitable projects, with the underprivileged, abandoned, handicapped, deprived and other destitute persons as priority beneficiaries; 4. To provide endowment or scholarship grants and any form of assistance to poor but deserving students, not only through formal education but also through technical, vocational livelihood or entrepreneurial courses; 5. To provide endowment or scholarship grants and any form of assistance for medical research in any frontier of knowledge which the Board of Trustees, or any committee validly constituted and with sufficient authority, may deem useful, beneficial, and adequate; cAaETS 6. To accept and receive contributions, donations and/or endowments from the government or from the general public, by deeds, grants, devises, bequests, or gifts, and to make use of this in operating enterprises, activities, or businesses as may be necessary to carry out the objectives of the Foundation. that after its registration with the SEC, the Foundation intends to obtain accreditation as a donee-institution pursuant to Executive Order No. 671 dated October 22, 2007; that the Foundation's funding shall come from gifts, donations and other contributions since the Foundation will not be engaged in activities for profit; that the Foundation will not pay any dividends; that the Foundation's trustees will receive no compensation; and that no part of the Foundation's income and increments shall inure to the benefit or any member, trustee, officer or any juridical or natural person whatsoever. You now request for confirmation of your opinions that: 1. Gifts, donations and other contributions made by residents and/or nonresidents to the Foundation in the form of cash and/or shares of stock, are exempt from donor's tax; and 2. The Deed of Donation or Contribution of Capital wherein shares of stock in a domestic corporation are donated to the Foundation is not subject to DST under Section 175, Tax Code, as amended. However, the acknowledgment on the deed is subject to DST of P15.00 imposed under Section 188, Tax Code. In reply, please be informed that in BIR Ruling No. DA-422-04 dated August 4, 2004, this Office opined that: "1. Donation to educational and charitable institutions is exempt from the payment of donor's tax pursuant to Section 101(A)(3) of the Tax C od e of 1997, subject to the condition that not more than 30% of said gift shall be used for administration purposes. Moreover, the deed of donation is not subject to documentary stamp tax prescribed under Section 196 of the Tax C od e of 1997, but only to the documentary stamp tax of P15.00 imposed under Section 188 of the same C od e." Furthermore, in BIR Ruling No. DA-379-06 dated June 20, 2006, this Office also ruled that "Inasmuch as the donee, the BSP, is a organized for religious, charitable, scientific, athletic or cultural purposes, operated exclusively for the promotion of social welfare and for other non-profitable purposes, donations to it is exempt from the payment of donor's tax pursuant to Section 101(A)(3) of the Tax C od e of 1997, as amended, subject to the condition that not more than 30% of said gift shall be used by the donee for administration purposes. Section 185 of Regulations No. 26, otherwise known as the R evise d Documentary Stamp Tax Regulations, implementing Title VII of the Tax C od e, provides that conveyances of realties not in connection with a sale, to trustees or other persons without consideration are not taxable. Accordingly, the Deed of Donation is not subject to the documentary stamp tax (DST) prescribed under Section 196 of the Tax C od e of 1997, as amended, but only to the DST of P15.00 imposed under Section 188 of the same C od e. TcCEDS On the other hand, donation in cash coming from a non-resident shall not be subject to any Philippine tax since non-residents are beyond the taxing jurisdiction of the Philippine Government (cited in BIR Ruling No. 115-99 dated August 6, 1999). In this connection, it may be stated that should such donation materialize, a non-resident donor is required to submit to this Office a copy of the Deed of Donation covering the aforesaid gift with the signature of the authorized representative of the non-resident donor, notarial commission and signature of the Notary Public acknowledging the instrument of donation duly authenticated by the Philippine Consulate General of the donor's residence. (BIR Ruling No. DA-048-2006 dated February 15, 2006)" Based on the foregoing, this Office hereby confirms your aforementioned opinions with a provision that in case of donations from non-resident citizens, they are required to submit to this Office the notarized Deed of Donation duly authenticated by the Philippine Consul General of the donor's residence. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service