BIR Ruling No. 058-14

February 13, 2014 BIR RULING NO. 058-14 Sec. 101 (A) (3) of the Tax Code of 1997; BIR Ruling No. 387-11; BIR Ruling No. 300-11 Nazareth School, Inc. 272 Plaza Sta. Teresita Sampaloc, Manila Attention: Sr. Delia Pedroso, F.I. Property Custodian Gentlemen : This refers to your letter dated 4 January 2013 requesting for exemption from the payment of donor's tax over a parcel of land donated by the NAZARETH SCHOOL, INC. in favor of PROVINCIAL SUPERIOR OF THE HIJAS DE JESUS CONGREGATION. It is represented that NAZARETH SCHOOL, INC. is the registered owner of certain real properties covered by Transfer Certificate of Title Nos. (TCT) T-8854, T-8231, T-13202, T-33505 and T-33504 including the improvements thereon, more particularly described as follows: TCT No. T-8854 "A parcel of land (Lot No. 513-B-# of the subdivision plan. Psd-16180, being a portion of Lot No. 513-B describe on plan Psd-262, G.L.R.O. Record No. 9739), situated in the City of Iloilo, Island of Panay. Bounded on the N., by Lot No. 513-B-2 of the subdivision plan, on the E., by lot Nos. 1111-A-29, 1111-A-30, 111-A-31 and 1111-A-32 of plan Psd-8972 and Lot No. 513-B-5 of the subdivision plan; on the S., by Lot Nos. 513-B-5 and 513-B-4 of the subdivision plan, and on the W., by Jalandoni Street. AREA, FOUR THOUSAND ONE HUNDRED THIRTY SEVEN SQUARE METERS (4,137) more or less." TCT No. T-8231 "A parcel of land (Lot No. 1111-A-14 of the subdivision plan Psd-8972) being a portion of Lot No. 1111-A, Psd-576, Iloilo Cadastre, described in Transfer Certificate of Title No. 11560, G.L.R.O. Record No. 9739), situated in the Poblacion, Municipality of Iloilo, Province of Iloilo. Bounded on the NE by Lot No. 111-A-13 of the subdivision plan; on the SE. by Lot Nos. 1111-A-8 and 1111-A-9 of the subdivision plan; on the SW. by Lot No. 1111-A-13 of the subdivision plan; and on the NW by Lot No. 1111-A-35 of the subdivision plan. AREA: ONE HUNDRED SEVENTY EIGHT SQUARE METERS (178) more or less." aEDCSI TCT No. T-13202 "A parcel of land (Lot No. 1111-A-30 of the subdivision plan Psd-8972, being a portion of Lot No. 1111-A, Psd-576, Iloilo Cadastre, described in Transfer Certificate of Title No. 11560, G.L.R.O. Record No. 9739), situated in the Poblacion, Municipality of Iloilo, Province of Iloilo. Bounded on the NE. by Lot No. 1111-A-29 of the subdivision plan; on the SE. by Lot No. 1111-A-35 of the subdivision plan; on the SW. by Lot No. 1111-A-31 of the subdivision plan; on the NW. by Lot No. 513-B, Psd-262. AREA: ONE HUNDRED SEVENTY-EIGHT METERS (178), more or less." TCT No. T-33505 "A parcel of land (Lot 474-C-1 of the subdivision plan psd-48327, being a portion of Lot 474-C described on plan Psd-3691, G.L.R.O. Record No. 22), situated in the Poblacion, Municipality of Pototan, Province of Iloilo. Bounded on the E. along line 1-2 by calle Consister ial; along line 203 by Lot 474-B of plan Psd-36918; along line 3-4 by Lots 474-A of plan Psd-36918; along line 4-5 by Lots 326 of Iloilo Cad; and along lines 5-6 and 6-7 by Lots 474-C-2 of the subdivision plan. Beginning at a point marked "1" on plan, being M. 62 deg. 54'E., 114.13 m. from deg.35'W.362m to point "3"; thence W. 15 deg. 54'E. 47.41 m to point "4" thence S.63 deg. 27. 27'E., 21.37 m. to point "5"; thence S. 18 deg. 26"W 37.18 m. to point 6: thence S.70 deg. 35"E. 17.36 m. to point "1" beginning; containing an area of One Thousand and fifty-three square meters (1,053); more or less." TCT No. T-33504 "A parcel of land (Lot 474-A of the subdivision plan Psd-36918, being a portion of Lot 474 of the cadastral survey of Pototan, G.L.R.O. Cad. Record No. 22), situated in the Poblacion, Municipality of Pototan, Province of Iloilo. Bounded on the NE. by Lot No. 328 of Pototan Cadastre; on the SE. by Lot Nos. 474-C and 474-B of the subdivision plan; on the SW. by Calle San Jose; and on the NW. by Lots 476 of plan Psd-36910. Beginning at a point marked "1" and plan, being S.82 deg. 19'E. 59.67 m. from B.L.L.M. 2, Pototan Cad; 222-Ext. thence M. 16 deg.00'E., 79.94 m. to point "2"; thence S. 63 deg. 27'E. 9.34 m. to point "3"; thence S.15 deg. 54'W. 47.41 m. to point "4"; thence S. 15 deg. 54'W.31.39 m. to point "5"; thence E. 70 deg. 29'W.9.24 m. to point of beginning. Containing an area of seven hundred and thirty four (734) square meters, more or less." On the other hand, the PROVINCIAL SUPERIOR OF THE HIJAS DE JESUS CONGREGATION, is a religious corporation sole, registered with the Securities and Exchange Commission (SEC) under SEC Reg. No. AN092-004938 dated 27 November 1992. The said corporation sole heads the Hijas de Jesus Congregation, which is a religious congregation devoted to education in all its forms, and is inspired by the spirituality of St. Ignatius of Loyola, and offers St. Ignatius' Spiritual Exercises for women and girls. On 4 January 2013, a Deed of Donation was executed whereby NAZARETH SCHOOL, INC. as represented by. Sr. Delia Pedrosa, F.I., transfers and conveys all of the rights, title and interest on the above-mentioned subject properties to the PROVINCIAL SUPERIOR OF THE HIJAS DE JESUS CONGREGATION, as represented and duly accepted by Sr. Georgita Hormillosa, F.I. ACaEcH 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 are 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. (BIR Ruling No. 387-11 dated October 18, 2011 and BIR Ruling No. 300-11 dated May 12, 2011) Inasmuch as the PROVINCIAL SUPERIOR OF THE HIJAS DE JESUS CONGREGATION 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 subject the donation of the above mentioned real property to donor's tax. Moreover, Section 4.106-3 of RR-2005, as amended provides that: "However, if the property transferred is one for sale, lease, or use in the ordinary course of trade or business and the transfer constitutes a completed gift, the transfer is subject to VAT as a deemed sale transaction pursuant to Sec. 4.106-7(a)(1) of these Regulations." 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. 387-11 dated October 18, 2011 and BIR Ruling No. 300-11 dated May 12, 2011) 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 PROVINCIAL SUPERIOR OF THE HIJAS DE JESUS CONGREGATION donates the same property donated to it to a non-exempt donee, then it 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. ITESAc Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue