BIR Ruling [DA-543-04]

October 29, 2004 BIR RULING [DA-543-04] Section 101 (A) (3) BIR Ruling No. 79-2001 Follosco Morallos & Herce Suite 1506, 15/F, 88 Corporate Center 141 Valero St. cor. Sedeo St. Salcedo Village, Makati City. Attention: Atty. Rachel P. Follosco Gentlemen : This refers to your letter dated May 17, 2004 requesting for confirmatory ruling, as follows: 1) The donation by Recoletos, Inc. to USJ-R, Inc. is exempt from donor's tax prescribed under Section 98 of the Tax Code of 1997; and 2) The grant of usufructuary rights without pecuniary consideration to USJ-R, Inc. is exempt from donor's and documentary stamp taxes. It is represented that the University of San Jose-Recoletos, Inc. ("USJ-R, Inc.") was primarily organized to continue the objectives, operations, and programs of the present USJ-R, Inc., which is owned by El 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 the activities relating to its schools/colleges; that the accreditations/government recognitions/licenses of USJ-R, Inc. issued by the Department of Education Culture and Sports ("DECS") have been assigned/transferred to USJ-R, Inc. pursuant to DECS approval dated October 22, 2003; that the transfer of the licenses and recognitions issued to USJ-R, Inc. by the Commission on Higher Education ("CHED") is still in process; that for USJ-R, Inc. to have the resources to be able to continue/assume the operations and programs of USJ-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) Deed of Donation donating certain assets that are presently being used actually and directly by the present USJ-R, Inc. for educational purposes; (2) "Grant of Usufructuary Rights" for a term of five (5) years, renewable every five (5) years thereafter, giving USJ-R, Inc., full use, possession, and enjoyment of buildings and the lots on which said school buildings and related structures are located, which presently constitutes the USJ-R, Inc. campus, with no obligation on the part of USJ-R, Inc. to pay any fee or rent, provided said real properties subject of the Grant are preserved at the expense of USJ-R, Inc. and used for educational purposes as well as the other activities in the pursuit of the objectives of USJ-R, Inc.; and that since the date of its incorporation, USJ-R, Inc. has had no operation, hence, no audited financial statements are available for submission to the Bureau. aITECA In reply, please be informed that inasmuch as the donee is a non-stock, non-profit 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 by Section 194 and 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. In view of the foregoing, this Office confirms your opinion that the donation of assets and grant of usufructuary rights without pecuniary consideration by Recoletos, Inc. to USJ-R, Inc. is exempt from donor's tax under Sections 98 and documentary stamp tax prescribed under Sections 196 and 194, respectively, both of the Tax Code of 1997. However, the acknowledgement on said Deed of Donation and Grant of Usufructuary Rights is subject to the documentary stamp tax of P15.00 imposed under Section 188, all of the same Code. 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 as null and void. cSIHCA Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group