BIR Ruling No. 008-15

January 20, 2015 BIR RULING NO. 008-15 Sections 101 (A) (3), 196 & 188 Tax Code of 1997, as amended; BIR Ruling No. 232-13; BIR Ruling No. 128-13; BIR Ruling No. 107-13; BIR Ruling No. 101-13; BIR Ruling No. 100-13 Handicap International 12-D 12th Floor, 122 Valero Tower, Valero Street, Salcedo Village, Makati City Attention: Mlle. Edith Van Wijngaarden Program Director Gentlemen : This refers to your letter dated October 10, 2013, requesting for the issuance of a Certificate of Exemption from the payment of Donor's Tax, on the donation of a building and industrial machineries made by HANDICAP INTERNATIONAL ('DONOR') in favor of FREEDOM TECHNOLOGY WHEELCHAIR FOUNDATION, INC. ('DONEE') pursuant to Section 101 (A) (3) of the National Internal Revenue Code (NIRC) of 1997, as amended. It is represented that HANDICAP INTERNATIONAL is a non-profit corporation governed by the French Act of July 1st, 1901, with principal office address at 14 Avenue Berthelot, 69361, Lyon Cedex 07, France; that it was granted license to transact business in the Philippines in its Application of Foreign Corporation to do Business in the Philippines under the provisions of Batas Pambansa Blg. 68 otherwise known as the Corporation Code of the Philippines and is registered with the Securities and Exchange Commission (SEC) under Company Registration No. AF093-000007 dated February 2, 1993 and with BIR Certificate of Registration No. OCN9RC0000291640 and Taxpayers Identification No. (TIN) 005-204-723-000; that its principal office address in the Philippines is at 12-D 12th Floor, 122 Valero Tower, Valero Street, Salcedo Village, Makati City, and that the sole and primary purpose for which it was formed is to provide aid in the rehabilitation of the physically handicapped anywhere in the world, for refugees, or populations that are victims of armed conflicts or epidemic. It is likewise represented that FREEDOM TECHNOLOGY WHEELCHAIR FOUNDATION, INC., a non-stock, non-profit corporation with business address at PHIVIDEC Industrial Estate, Sta. Cruz, Tagoloan, Misamis Oriental is duly organized and existing under the laws of the Republic of the Philippines, with SEC Company Registration No. CN201005140 dated March 30, 2010; that it is registered with the BIR with Certificate of Registration No. OCN2RC0000287498 and Taxpayers Identification No. (TIN) 007-670-370-000; and that the purposes for which such association was incorporated are: 1) To provide assistive device to Persons with Disabilities (PWD's) by producing wheelchairs based on body measurement, posture, lifestyle and physical environment of the user ensuring high quality, safety function and proper fit, in the respect of the international norms and guidelines recommended by the World Health Organization (WHO). FT shall likewise provide the same high-quality but non-customized wheelchairs in cases of emergency situations, taking into consideration urgent need for mobility of users; 2) To support Disabled People's Organizations (DPOs), in general, and all indigent Persons with Disabilities (PWDs), in particular, to have access to wheelchairs through fundraising, solicitations, etc.; and 3) To provide adequate necessary services related to this support ( i.e. , rehabilitation, physiotherapy, maintenance, networking, awareness) and such other services necessary and proper to be done in furtherance of the purposes of the Foundation. On September 24, 2013, HANDICAP INTERNATIONAL (represented by Ms. Catherine Vasseur in her capacity as Country Director and duly authorized by the Chairman), for and in consideration of the Donee's long-standing partnership with Donor in the cause of providing assistive devices or wheelchairs to persons with disabilities by producing wheelchairs based on body measurement, posture, lifestyle and physical environment of the user; ensuring high quality, safety, function and proper fit, in accordance with international norms and guidelines recommended by the World Health Organization (WHO), and as an act of gratitude and pure liberality on its part, executed a Deed of Donation in favor of FREEDOM TECHNOLOGY WHEELCHAIR FOUNDATION, INC. (represented by Dr. Alexis L. Reyes, Board Chairperson). The total market value of said properties amounts to Three Million Four Hundred Sixteen Thousand Four Hundred Eighty Four 98/100 Pesos (Php3,416,484.98). The donation covered the following properties which are owned by and registered in the name of the Donor, to wit: ADSTC Tax Property Declaration Index Property No. No. No. Unit/s Description 1 L-111313 538-14-009-62-001 B 1 WHEELCHAIR PRODUCTION CENTER & OFFICE BUILDING 2 L-111314 538-14-009-62-001 M 1 "MILLER" MEG WELDING MACHINE 3 L-111315 538-14-009-62-002 M 2 "US DAYTON" SPEED DRILL PRESS 4 L-111316 538-14-009-62-003 M 4 "COLUMBIA" BENCH VICE 5 L-111317 538-14-009-62-004 M 1 "US COLUMBIA" ANVIL 6 L-111318 538-14-009-62-005 M 2 "MAKITA" DISC CUTTER 7 L-111319 538-14-009-62-007 M 1 "MAKITA" HAMMER DRILL 8 L-111320 538-14-009-62-011 M 1 "BLACK & DECKER" BENCH GRIDER 9 L-111321 538-14-009-62-012 M 2 "HARIS" ACETYLENE WELDING KIT 10 L-111322 538-14-009-62-013 M 1 "SINGER" HIGH SPEED SEWING MACHINE 11 L-111323 538-14-009-62-014 M 1 LOT POWER COATING MACHINERY 12 L-111324 538-14-009-62-015 M 1 "INGERSOLL RAND" AIR COMPRESSOR 13 L-111325 538-14-009-62-016 M 1 "MILLER" MILLERMATIC MEG MACHINE 14 L-111326 538-14-009-62-017 M 2 "MAKITA" ANGLE GRINDER 15 L-111327 538-14-009-62-018 M 2 "CHAMPION" GRINDER 1hp each 16 L-111328 538-14-009-62-019 M 1 "CEBORA" MEG MACHINE 17 L-111329 538-14-009-62-020 M 1 "MAKITA" ANGLE GRINDER 18 L-111330 538-14-009-62-021 M 4 "ERON" BENCH VICE In support of the request, the following documents were submitted by HANDICAP INTERNATIONAL: 1. SEC certified true copies of the Certificates of Incorporation of HANDICAP INTERNATIONAL and FREEDOM TECHNOLOGY WHEELCHAIR FOUNDATION, INC., respectively; 2. SEC certified true copy of the Application of Foreign Corporation to do Business in the Philippines under the Provisions of Batas Pambansa Blg. 68, Otherwise Known as the "Corporation Code of the Philippines" of HANDICAP INTERNATIONAL; 3. SEC certified true copy of the Articles of Incorporation and By-laws of FREEDOM TECHNOLOGY WHEELCHAIR FOUNDATION, INC.; 4. SEC/BIR certified true copies of the Audited Financial Statements for the immediately preceding taxable year and the corresponding Annual Income Tax Return of FREEDOM TECHNOLOGY WHEELCHAIR FOUNDATION, INC.; 5. Affidavit of Undertaking that not more than thirty percent (30%) of the donated property or value thereof shall be used by FREEDOM TECHNOLOGY WHEELCHAIR FOUNDATION, INC. for administration purposes; 6. Certification under Oath by the Executive Officer of the Donee corporation that its trustees do not receive any compensation; 7. Verification and Affidavit of Non-forum Shopping; 8. Duplicate original/Certified true copy of the Board Resolution authorizing Dr. Alexis L. Reyes, Board Chairperson, to accept the aforesaid donations on behalf of FREEDOM TECHNOLOGY WHEELCHAIR FOUNDATION, INC.; 9. Duplicate original/certified true copy of the Deed of Donation dated September 24, 2013; CSHDTE 10. Certified true copies of the Tax Declarations for the donated properties (for building and machineries); 11. Certified true copies of the BIR Certificates of Registration of both Donor and Donee corporations; and 12. Certified true copies of the Donor's Tax Returns (BIR Form 1800) "duly filed with and stamped received by" the Revenue District Office (RDO) No. 50, South Makati. In reply, please be informed that gifts in favor of educational and/or charitable, religious, cultural or social welfare corporation, institution, accredited non-government organization, trust or philanthropic 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 thirty percent (30%) of the said gift shall be used by the donee for administration purposes. (BIR Ruling No. 232-13 dated June 20, 2013) In as much as the FREEDOM TECHNOLOGY WHEELCHAIR FOUNDATION, INC. is a non-stock, non-profit, social welfare corporation, any donation to it is exempt from the payment of donor's tax pursuant to the above provisions 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. Since this is a donation of real property and industrial machineries, the Register of Deeds/Assessor shall annotate this condition at the back of the title because failure to comply with the condition will subject the donation to donor's tax. Moreover, Section 185 of Revenue Regulations No. 26, otherwise known as the Revised Documentary Stamp Tax Regulations, implementing Title VII of the Tax Code of 1997, as amended, 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. 429-11 dated November 4, 2011) 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 donation 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. Also, if FREEDOM TECHNOLOGY WHEELCHAIR FOUNDATION, INC. donates the same property donated to it to a non-exempt donee, it shall be liable for donor's tax as provided for under Section 98 of the Tax Code of 1997, as amended. (BIR Ruling No. 118-12 dated February 22, 2012) 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