Dario Reyes Hocson & Viado

May 21, 2010 BIR RULING [DA-(C-013) 069-10] P.D. No. 1264; BIR Ruling No. DA-(C-034) 126-08 Dario Reyes Hocson & Viado 902-A West Tower, Philippine Stock Exchange Centre Exchange Road, Ortigas Center Pasig City Attention: Atty. Rodolfo O. Reyes Partner Gentlemen : This refers to your letter dated April 12, 2010 requesting on behalf of your client, the Philippine National Red Cross (PNRC) for a ruling that PNRC is exempt from the payment of capital gains tax on the sale of its real property donated to it. AECacS As represented, the PNRC is the premiere humanitarian organization in the country and the entire world. Its main objective is to alleviate human suffering wherever and whenever such situations occur. During wartime, the PNRC assumes a neutral, non-combative posture to attend to those wounded in battle, or to non-combatants adversely affected by war. During peacetime, the PNRC provides aid to victims of natural or manmade calamities. The PNRC was chartered and organized in 1947 through Republic Act (RA) No. 95, which was amended by RA Nos. 885 and 6373 and later on by Presidential Decrees (PD) Nos. 1264 and 1643. The PNRC was created as a result of our country's adherence to the Geneva Red Cross Convention on February 14, 1947, and by "that action, indicated its desire to participate with the nations of the world in mitigating the suffering caused by war . . . ." Because the PNRC was created as an offshoot of the Philippine government's treaty commitments under the Geneva Red Cross Convention of 1947, it remits an annual Statutory Obligation fee to the International Federation of Red Cross and Red Crescent Societies (IFRC). For the year 2008, the PNRC remitted to the IFRC the total amount of US$36,676.78 as the former's Statutory Obligation to the latter. Due to the expiration of the Parity Provisions of the Laurel-Langley Act, several American firms that owned properties in the Philippines were compelled to dispose of such properties. Some of these real properties were donated to the PNRC. Thereafter, by virtue of Letter of Instruction No. 307 issued by then President Ferdinand E. Marcos, the properties were leased back by the PNRC to the American firms then occupying them. Recently, the PNRC decided to dispose of some of its properties to raise funds to meet its growing financial and operational needs as it widens the reach of its humanitarian programs throughout the country. One of the real properties the PNRC decided to dispose of was that previously owned by S.C. Johnson Philippines, Inc. located at Estrella St., Guadalupe Viejo, Makati City and covered by Transfer Certificate of Title No. 75862. aHSTID Pursuant to the PNRC's intention to dispose of some of its properties to raise funds for its operations, the PNRC Board of Governors approved the sale of the above-mentioned property during its Board Meeting on February 25, 2010. After negotiations with several parties the PNRC has agreed to sell the subject property in favor of SM Development Corporation. In reply, please be informed that Section 4 of PD No. 1264, as amended, states, viz. : "Section 4. In furtherance of the purposes mentioned in the preceding sub-paragraphs, the Philippine National Red Cross shall: (a) . . . (b) Be exempt from payment of all duties, taxes, fees, and other charges of all kinds on all importations and purchase for its exclusive use, on donations for its disaster relief work and other Red Cross services, and in its benefits and fund raising drives all provisions of law to the contrary notwithstanding. (c) . . ." Moreover, this Office ruled in BIR Ruling No. DA-(C-034) 126-08 dated August 8, 2008, citing BIR Ruling No. 072-95 dated April 17, 1995, as follows: "In view of the above, your request for a ruling that the PNRC is exempt from the payment of capital gains tax on the sale of its real properties is hereby confirmed on the basis that Section 4 of Presidential Decree No. 1264 provided that the sale of the said property is connected with the PNRC's fund raising activities." Applying the foregoing, this Office hereby rules that the sale by PNRC of its donated real property in favor of SM Development Corporation is exempt from the payment of capital gains tax. 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. SAHEIc Very truly yours, Commissioner of Internal Revenue By: (SGD.) GREGORIO V. CABANTAC Deputy Commissioner Legal and Inspection Group