BIR Ruling [DA-214-04]

April 20, 2004 BIR RULING [DA-214-04] 34; 101 (A); S-30-54-98; DA 28-98 School of Mount St. Mary, Inc. Guillerma Village, Phase 2, Sta. Rita San Miguel Bulacan Attention: Ms. Ofelia D. Malabago Business Office Administrator Gentlemen : This refers to your letter dated April 16, 2004 requesting for confirmation of your opinion as follows: 1) That the donation made by Oro Development Corporation (ODECO) to the School of Mount St. Mary, Inc. (SMSMI) is exempt from the payment of donor's tax; and 2) That ODECO is entitled to fully deduct against its gross income the amount donated to the school as set forth in Section 34(H)(2)(C) of the Tax Code of 1997. It is represented that SMSMI is a corporation duly organized and existing under and by virtue of the laws of the Republic of the Philippines; that SMSMI is a non-stock, non-profit educational institution duly registered as donee institution by virtue of Certificate of Registration No. 011-2004 issued on February 26, 2004; that on March 19, 2004, a Deed of Donation was executed by and between ODECO as Donor and SMSMI as Donee, whereby the former donated to the latter several parcels of land covered by Transfer Certificate of Title Nos. 24121, 25818, 25819, 25820, 25821, 2224, 2225, 2226, 2227, 2228, 2229, 2230, 2231, 2232, 2233, 2234, 2235, 2236, 2237, 2238, 2239, 2240, 2241, 2242, 2243, 2244, 2245, 2246, 2247, 2248, 2249, 2250, 2251, 2252, 2253, 2254, 2255, 2256, 2257, 2201, 2202, 2203 and 2205, all of the Registry of Deeds of Malolos Bulacan that the donated properties consisting of forty-three (43) parcels of land located at Sta. Rita, San Miguel, Bulacan, with an aggregate area of 10,192 square meters, shall be used exclusively for the expansion of the Donee's school facilities and that this was ODECO's desire to help SMSMI in the furtherance of its mission of providing quality education. In reply, please be informed as follows: 1) Since SMSMI is an accredited donee institution, the aforementioned donation is exempt from the payment of the 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 by the donee for administration purposes. Moreover, the aforesaid Deed of Donation is not subject to the documentary stamp tax prescribed under Section 196 of the Tax Code, as amended, but only to the documentary stamp tax of P15.00 imposed under Section 188 of the Tax Code of 1997, as amended. ( BIR Ruling No. 108-94 dated May 30, 1994 and BIR Ruling No. DA-28-98 dated January 29, 1998 ) 2) Section 34(H)(2)(C) of the Tax Code of 1997 provides that donations to an accredited non-government organization (NGO), which means a non-profit domestic corporation or association organized and operated exclusively for scientific, research, educational, character building and youth and sports development, health, social welfare, cultural or charitable purposes or a combination, then of, no part of the net income of which inures to the benefit of any private individual shall be deductible in full from the taxable business income of the donor depending on the donee's compliance with the level of administrative expense and utilization requirements. Otherwise, it shall be entitled only to the limited deductions as provided for under Section 34(H)(1) of the same Tax Code. ( BIR Ruling No. S-30-054-98 dated September 30, 1998 ) Since SMSMI is a duly accredited non-stock, non-profit educational institution, the above donation in its favor shall be deductible in full from the gross income of its donor, ODECO, subject to the compliance by SMSMI with the level of administrative expense and utilization requirements. Furthermore, for purposes of deductibility of the donation, the amount deductible by ODECO against its gross income shall be the aggregate acquisition cost of the properties it donated, as provided for in Section 34(H)(3) of the Tax Code of 1997, as implemented by Rev. Regs. No. 13-98. 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 or that the requirements imposed therein have not been complied with, then this ruling shall be considered null and void. Very truly yours, (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service