BIR Ruling [DA-177-03]

June 5, 2003 BIR RULING [DA-177-03] 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 December 2, 2002 requesting on behalf of your client San Sebastian College Recoletos, Inc. (SSCRI), 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 SSCRI is a non-stock, non-profit educational corporation duly organized under Philippine law; that it was primarily organized to continue the objectives, operations and programs of the present San Sebastian College-Recoletos (SSC) owned by Superior de la Corporacion Filipina de Padres Agustinos Recoletos, Inc. (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 its activities relating to its operation of schools/colleges/educational institutions; that SSC is currently in the process of assigning/transferring to SSCRI its accreditations/government recognitions/licenses issued to the Department of Education Culture and Sports (DECS) and the Commission on Higher Education (CHED), authorizing it to offer primary, secondary and tertiary education; that for SSCRI to have the resources to be able to continue/assume the operations and programs of SSC and thereby pursue the goal of Recoletos Inc. to support a Catholic educational institution that offers students quality Christian community oriented education, Recoletos Inc. intends to execute the following: (1) A Deed of Donation Pursuant to such Deed, Recoletos Inc. will donate assets that are presently being used actually and directly by the present SSC for educational purposes; (2) Grant of Usufructuary Rights Pursuant to the Grant, Recoletos Inc. will give SSCRI full use, possession and enjoyment of buildings and the lots on which said school buildings and related structures are located, which presently constitutes the SSC campus. SSCRI shall have no obligation to pay any fee or rent, provided said real properties subject of the Grant are preserved at the expense of SSCRI and used for educational purposes as well as the other activities in the pursuit of the objectives of SSCRI. The Grant is for a term of five (5) years, renewable every five (5) years thereafter. and that the list of assets to be donated are those mentioned in the Annex "A" and the Grant of Usufructuary Rights as Annex "C" of your letter request. 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. 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. cSCTID Very truly yours, Commissioner of Internal Revenue By: (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service