Ms. Liwayway Bautista

December 15, 2009 BIR RULING [DA-(DT-072) 780-09] 101 (A) (3); DA-329-2008 Ms. Liwayway Bautista P. Zamora St., San Pablo Madame : This refers to your letter dated July 23, 2009 which was indorsed to this Office by Revenue Region No. 9, San Pablo City requesting on behalf of Canossian Daughters of Charity, Inc. for exemption from the payment of donor's tax on your donation of a parcel of land pursuant to the provisions of Sec. 101 of the Tax Code of 1997. It is represented that on July 20, 2009, you executed a Deed of Donation in favor of the Canossian Daughters of Charity, Inc., a religious organization, over a parcel of land covered by Tax Declaration No. 94-058-00159, situated in Barangay San Jose, City of San Pablo, Province of Laguna containing an area of Twenty Thousand Seven Hundred Seven (20,707) 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) 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 Canossian Daughters of Charity, 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 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). CSHDTE 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 Section 2.57.2 of Revenue Regulations No. 2-98, as amended. If the Canossian Daughters of Charity, Inc. donates the same property donated to it to a non-exempt donee, Canossian Daughters of Charity, 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, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service