Picazo Buyco Tan Fider & Santos

November 10, 2009 BIR RULING [DA-(DT-062) 661-09] 101 (A) (3); BIR Ruling No. DA-408-04; DA-601-06 Picazo Buyco Tan Fider & Santos 18th, 19th & 17th Floors, Liberty Center 104 H.V. dela Costa Street, Salcedo Village, Makati City Attention: Atty. Ma. Alicia Picazo-San Juan Gentlemen : This refers to your letter dated July 24, 2009 requesting on behalf of your clients, Ofelia C. Abaya, Antonio C. Abaya, Carmen A. Carlos, Benjamin C. Abaya and Ramon C. Abaya (collectively referred to as the Donors) for confirmation of opinion that the proposed donation of seven (7) parcels of land to the Roman Catholic Archbishop of Cagayan de Oro, Inc. is exempt from the donor's tax, documentary stamp tax and value-added tax (VAT). cHECAS It is represented that the Donors executed proposed Deeds of Donation in favor of the Roman Catholic Archbishop of Cagayan de Oro, Inc., a duly constituted corporation sole existing under the laws of the Republic of the Philippines, represented by Archbishop Antonio J. Ledesma, S.J. over 7 parcels of land covered by Transfer Certificate of Title (TCT) No. T-21247 and Original Certificates of Title (OCT) Nos. P-12989, P-12992 and P-12990 all situated in Barrio Lanise, Municipality of Claveria, Province of Misamis Oriental, TCT No. T-127514, T-127513 and T-127512 located at Macasandig, Cagayan de Oro City. The Donors as an act of liberality and generosity voluntarily and freely give, transfer and convey by way of donation unto the Donee the subject properties, with all the buildings and improvements that may be found thereon, free from all liens and encumbrances. 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) 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 Roman Catholic Archbishop of Cagayan de Oro, Inc. is a religious organization, 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 TCT/OCT 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 aforesaid deeds 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). Furthermore, if the donor is a 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 (RR) No. 16-2005, as amended, the same being considered a transaction deemed sale. But, if the donor is not a VAT-registered person, the donation is exempt from VAT. It is to be noted that 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 Section 2.57.2 of RR No. 2-98, as amended. If the Roman Catholic Archbishop of Cagayan de Oro, Inc. donates the same property donated to it to a non-exempt donee, the Roman Catholic Archbishop of Cagayan de Oro, 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 ascertained that the facts are different, then this ruling shall be considered as null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service