BIR Ruling No. 005-13

January 3, 2013 BIR RULING NO. 005-13 Sections 101 (A) (3), 196 and 188 of the Tax Code of 1997, as amended; and Section 185 Regulations No. 26; BIR Ruling No. 452-93; BIR Ruling No. 225-11; BIR Ruling No. 429-11; and BIR Ruling No. 252-93 Lasal Tech Academy, Inc. Km. 99 Maharlika Highway, Tambo, San Leonardo, Nueva Ecija Attention: Martin C. Pangandian Gentlemen : This refers to your letter dated 12 July 2012, requesting for a ruling on the donation of real property made by Prime Eagle Realty Venture, Inc. to Lasal Tech Academy, Inc. It is represented that Prime Eagle Realty Venture, Inc., with Tax Identification Number (TIN) 236-614-702-000, a domestic corporation with principal place of business at No. 75 15th Avenue, Murphy, Cubao, Quezon City is the owner of a parcel of land covered by TCT No. NT-305850 and Tax Declaration No. 05-22007, more particularly described as Lot A-2-A-3-B of the subdivision plan Psd-034927-063224, being a portion of Lot A-2-A-3, Psd-49612 LRC No, located at San Leonardo Nueva Ecija and containing an area of nineteen thousand twenty one (19,021) square meters. On the other hand, Lasal Tech Academy, Inc., with TIN 007-805-937-000, is a non-stock non-profit educational institution with principal place of business at Km. 99 Maharlika Highway, Tambo, San Leonardo, Nueva Ecija. On 9 July 2012, Prime Eagle Realty Venture, Inc. executed in favor of Lasal Tech Academy, Inc. a Deed of Donation over the subject parcel of land covered by TCT No. NT-305850 and Tax Declaration No. 05-22007. HICATc In reply, please be informed that gifts in favor of educational and/or charitable, religious, cultural or social welfare corporation, institution, accredited nongovernment organization, trust or philanthropic organization or research institution or organization are exempt from the payment of the donor's tax pursuant to Section 101 (A) (3) 1 of the Tax Code of 1997, as amended, subject to the condition that not more than thirty percent (30%) of said gift shall be used by the donee for administration purposes. (BIR Ruling No. 452-93 dated November 19, 1993; BIR Ruling No. 225-11, dated July 13, 2011; BIR Ruling No. 429-11, dated November 4, 2011) Inasmuch as Lasal Tech Academy, Inc. is a non-stock and non-profit 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 30% of said gift shall be used by the donee for administration purposes. In this case, the deed of donation here also provides that the subject donation of real property is "subject to the condition that not more than 30% of said gift shall be used by the DONEE for administration purposes." Thus, the Register of Deeds shall annotate this condition at the back of the title because failure to comply with any of the conditions set by the donor shall be a ground for the revocation of the donation pursuant to Article 764 2 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. 252-93 dated January 17, 1993; BIR Ruling No. 225-11, dated July 13, 2011; BIR Ruling No. 429-11, dated November 4, 2011) 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. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue Footnotes 1. Sec. 101. Exemption of Certain Gifts. The following gifts or donations shall be exempt from the tax provided for in this Chapter: (A) In the Case of Gifts Made by a Resident. (1) ... (2) ... (3) Gifts in favor of an educational and/or charitable, religious, cultural or social welfare corporation, institution, accredited non-government organization, trust or philanthropic organization or research institution or organization: Provided, however, That not more than thirty percent (30%) of said gifts shall be used by such donee for administration purposes. For the purpose of this exemption, a 'non-profit educational and/or charitable corporation, institution, accredited non-government organization, trust or philanthropic organization and/or research institution or organization' is a school, college or university and/or charitable corporation, accredited non-government organization, trust or philanthropic organization and/or research institution or organization, incorporated as a non-stock entity, paying no dividends, governed by trustees who receive no compensation, and devoting all its income, whether students' fee or gifts, donations, subsidies or other forms of philanthropy, to the accomplishment and promotion of the purposes enumerated in its Articles of Incorporation. 2. Art. 764. The donation shall be revoked at the instance of the donor, when the donee fails to comply with any of the conditions which the former imposed upon the latter. In this case, the property donated shall be returned to the donor, the alienations made by the donee and the mortgages imposed thereon by him being void, with the limitations established, with regard to third persons, by the Mortgage Law and Land Registration Laws.