BIR Ruling [DA-202-99]

March 30, 1999 BIR RULING [DA-202-99] Poblador Bautista & Reyes 5th Floor, SEDCCO I Building 120 Rada cor. Legaspi Streets Legaspi Village, Makati City Attention: Atty . Jaime G . Hofilena Partner Gentlemen : This refers to your letter dated January 20, 1998 requesting confirmation of your opinion that the donation made by Donaville Development and Realty, Inc. (Donaville) to the Las Pias City Government, of several parcels of land is exempt from donor's tax; and whether the same can be claimed as deduction from its gross income. It is represented that Las Pias City Government is the owner of a parcel of land consisting of the road right of way popularly known as Daang Hari located at Almanza II, Las Pias with a width measurement of six and one-half (61.5) meters to about twelve (12) meters; that on January 23, 1993, the Sangguniang Bayan of the City of Las Pias passed and approved Resolution No. 395-92, Series of 1992 authorizing the expropriation of real property along the length of Daang Hari to widen it into a twenty-five meter road right of way; that Donaville is the owner of several parcels of land located within TS Cruz Subdivision, Almanza II, Las Pias, all along Daang Hari; that recognizing the significance of developing Daang Hari as a major arterial road to provide access to and from Las Pias and increase the mobility of commuters, Donaville donated portions of its properties to widen Daang Hari to a twenty-five meter right of way; and that the City of Las Pias is willing to accept said donation as embodied in the Agreement dated November 10, 1993. In reply, please be informed that the aforementioned donation by Donaville to the City of Las Pias is exempt from donor's tax in view of Section 101(A)(2) of the Tax Code of 1997 which provides that gifts made to or for the use of the National Government or any entity created by any of its agencies which is not conducted for profit, or to any political subdivision of the said government shall be exempt from tax. (BIR Ruling No. 021-96 dated February 21, 1996) On the other hand, Section 34(H) of Republic Act No. 8424 provides, viz: "SEC. 34. Deductions from Gross Income . Except for taxpayers earning compensation income arising from personal services rendered under an employer-employee relationship where no deductions shall be allowed under this Section other than under Subsection (M) hereof, in computing taxable income subject to income tax under Sections 24(A); 25(A); 26; 27(A), (B), and (C) and 28(A)(1), there shall be allowed the following deductions from gross income: xxx xxx xxx (H) Charitable and Other Contributions. xxx xxx xxx "(2) Contributions Deductible in Full. . . . xxx xxx xxx "(a) Donations to the Government . Donations to the Government of the Philippines or to any of its agencies or political subdivisions, including fully-owned government corporations, exclusively to finance, to provide for, or to be used in undertaking priority activities in education, health, youth and sports development, human settlements, science and culture, and in economic development according to a National Priority, Plan determined by the National Economic and Development Authority (NEDA), in consultation with appropriate government agencies, including its regional development councils and private philanthropic persons and institutions: Provided, That any donation which is made to the Government or to any of its agencies or political subdivisions not in accordance with the said annual priority plan shall be subject to the limitations prescribed in paragraph (1) of this Subsection;" Based on the foregoing, this Office hereby confirms your opinion that the donation by Donaville of its several parcels of land to the City Government of Las Pias is exempt from donor's tax and is likewise deductible in full from its gross income, for income tax purposes, if said donation is covered by the national priority plan of the National Economic and Development Authority (NEDA); otherwise, the same will be deductible in an amount not in excess of 5% of Donaville's taxable income derived from business computed without the benefit of this deduction, pursuant to Section 34(H) of the Tax Code of 1997. prLL Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)