Quintin P. Alcid, Jr. & Associates

January 14, 2009 BIR RULING [DA-(DT-002) 016-09] Section 30; BIR Ruling No. DA-408-04; DA-601-06 Quintin P. Alcid, Jr. & Associates 114 Himlayan Road cor. Tandang Sora Ave. Unit #103 Bonaventure Violet Bldg. Brgy. Pasong Tamo, Quezon City Attention: Atty. Quintin P. Alcid, Jr. Gentlemen : This refers to your letter dated September 9, 2008 requesting for exemption from the payment of donor's tax relative to donations in favor of St. Anthony Academy of Quezon City, Inc. SECHIA Documents show that St. Anthony Child Learning Center of Q.C., Inc. is a duly organized non-profit educational institution and existing under Philippine laws with principal office address at Himlayan Road, Pasong Tamo, Quezon City. On the other hand, St. Anthony Academy of Quezon City, Inc. is a duly organized non-stock educational institution and existing under Philippine laws with principal office address at Quezon City. On July 18, 2008, St. Anthony Child Learning Center of Q.C., Inc. executed a Deed of Donation whereby it transferred a parcel of land covered by Transfer Certificate of Title No. 42339 located in Pasong Tamo, Quezon City and containing an area of 1,360.60 square meters. In reply, please be informed that gifts in favor of an educational and/or charitable, religious, cultural or social welfare corporation, institution, accredited nongovernment organization, trust or philanthropic organization or research institution or organization is exempt from the payment of the donor's tax pursuant to Section 101 (A) (3) and (B) (2) of the Tax Code of 1997, as amended, subject to the condition that not more than 30% of said gift shall be used by the donee for administration purposes. Inasmuch as St. Anthony Academy of Quezon City, Inc. is an educational institution, any donation to it is exempt from the payment of donor's tax pursuant to the above provisions of the Tax Code subject to the condition that not more than thirty percent (30%) of said gift shall be used by the donee for administration purposes. In case of donation of real property, the Register of Deeds shall annotate this condition at the back of the Transfer Certificate of Title because failure to comply with the said condition shall be a ground for the revocation of the donation pursuant to Article 764 of the New Civil Code. Section 185 of Regulations No. 26, otherwise known as the Revised Documentary Stamp Tax Regulations, implementing Title VII of the Tax Code, provides that conveyances of realties not in connection with a sale, to trustees or other persons without consideration are not taxable. Accordingly, the deed of donation is, likewise, 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 same Code (BIR Ruling No. DA-28-98 dated January 29, 1998). If the donor is a value-added tax (VAT) registered person and the donation is an ordinary asset, the donation is subject to VAT pursuant to Section 4.106-7 of Revenue Regulations No. 16-2005, the same being considered a transaction deemed sale, but the input VAT attributed to the VAT portion of the cost of the donation should be deducted from the accumulated input VAT of the donor. If the donor is not a VAT registered person, the donation is exempt from VAT. EScAID However, if the same property acquired by gift is subsequently conveyed by way of sale or exchange, the sale will be subject to corporate income tax on the gain realized which is determined by deducting from the gross selling price the historical cost or the adjusted basis thereof, as it would be in the hands of the donor, pursuant to Section 27 in relation to Section 101, both of the Tax Code of 1997, as amended, and consequently to the creditable expanded withholding tax under Revenue Regulations No. 2.57.2 of Revenue Regulations No. 2-98, as amended. If St. Anthony Academy of Quezon City, Inc. donates the same property donated to it to a nonexempt donee, St. Anthony Academy of Quezon City, Inc. shall be liable for donor's tax pursuant to Section 98 of the Tax Code of 1997, as amended. 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. Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service