BIR Ruling No. 004-13

January 3, 2013 BIR RULING NO. 004-13 Sec. 101 (A) (3) of the Tax Code of 1997; BIR Ruling No. 300-2011; RMC 7-2012 Superior of the Order of the Holy Cross, Inc. (Corporation Sole) St. Rafael's Priory Malimanga, Candelaria Zambales Attention: Rev. Fr. Markus Schwald Gentlemen : This refers to your undated letter requesting exemption from donor's tax on the donation of a parcel of land executed by the Roman Catholic Bishop of Iba, Inc. in favor of the Superior of the Order of the Holy Cross, Inc. (Corporation Sole) (hereinafter, " Holy Cross ") pursuant to Section 101 (A) (3) of the 1997 Tax Code, as amended. AcHEaS It is represented that Roman Catholic Bishop of Iba, Inc., with Tax Identification No. 238-439-055-000, is a Corporation Sole duly organized and existing under Philippine laws, bearing Securities and Exchange Commission (SEC) Registration No. 12066; that Holy Cross is also a Corporation Sole duly registered with the SEC bearing SEC Registration No. CN201105115; that on February 27, 2012, the Roman Catholic Bishop of Iba, Inc., through Most. Rev. Florentino G. Lavarias, executed a Deed of Donation in favor of Holy Cross, represented by Rev. Fr. Bernhard Bischof, over a parcel of land, together with the buildings and all the improvements found thereon, covered by Transfer Certificate of Title (TCT) No. 044-2010001469 containing an area of Sixty Thousand Six Hundred Twenty (60,620) square meters, situated at Barangay Malimanga, Candelaria, Zambales, particularly described as follows: TCT No. 044-2010001469 "A parcel of land (Lot 1 of the Subdivision Plan PSD-037103-059189, being a portion of Lot PSU-94930, LRC Rec. No.) situated in the Barrio of Uacon, Municipality of Candelaria, Province of Zambales, containing an area of Sixty Thousand Six Hundred Twenty (60,620) 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 Holy Cross is a religious corporation sole, 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 donation 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 subject the donation to donor's tax. Section 185 of Revenue 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 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. 300-2011 dated August 12, 2011 ) It is to be noted that if the same property acquired by donation is subsequently conveyed by way of sale or exchange, the sale will be subject to corporate income tax or capital gains tax, as the case may be, pursuant to Revenue Memorandum Circular (RMC) 7-2012 . The aforesaid RMC circularizes the pertinent portion of BIR Ruling No. 023-2010 dated August 4, 2010 regarding the taxability of non-stock non-profit organization on its disposition of real property, to wit: "The last paragraph of Section 30 (then Section 26) of the Tax Code, clearly subjects to tax the income of whatever kind and character derived by any organization otherwise exempt under the same section, from any of its properties or activities conducted for profit, regardless of the disposition made of such income. Specifically, the Tax Code provides as follows: 'SEC. 30. Exemptions from Tax on Corporations. The following organizations shall not be taxed under this Title in respect to income received by them as such: xxx xxx xxx (E) Nonstock corporation or association organized and operated exclusively for religious, charitable, scientific, athletic, or cultural purposes, or for the rehabilitation of veterans, no part of its net income or assets shall belong to or inure to the benefit of any member, organizer, officer or any specific person; xxx xxx xxx (G) Civic league or organization not organized for profit but operated exclusively for the promotion of social welfare; xxx xxx xxx Notwithstanding, the provisions in the preceding paragraphs, the income of whatever kind and character of the foregoing organizations from any properties, real or personal, or from any of the activities conducted for profit regardless of the disposition made of such income, shall be subject to tax imposed under this Code.' (Emphasis supplied) The above-quoted provision is literal in its language and plain and categorical in its meaning. The last paragraph of Section 30 (then Section 26) of the Tax Code, particularly, does not leave any room for interpretation; the income from any of the organization's properties is subject to tax under the Tax Code, regardless of the disposition made of such income. (BIR Ruling No. DA-(C-058)206-09)" Moreover, if Holy Cross donates the same property donated to it to a non-exempt donee, Holy Cross shall be liable for donor's tax pursuant to Section 98 of the Tax Code of 1997, as amended. SDITAC 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.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue