BIR Ruling No. 068-12

February 10, 2012 BIR RULING NO. 068-12 Sec. 101 (A) (3) of the Tax Code of 1997; BIR Ruling No. 387-11; BIR Ruling No. 300-11 Ma. Cecilia P. Castro Roman Catholic Bishop of Malolos, Inc. Malolos, Bulacan Madam : This refers to your letter dated January 10, 2011 duly indorsed by Revenue Region No. 5-Caloocan City requesting for exemption from the payment of donor's tax on the donation of land in favor of the Roman Catholic Bishop of Malolos, Inc. IASCTD It is represented that Marina de G. Sullivan is the registered owner of a parcel of land covered by Transfer Certificate of Title No. 039-2010000230 designated as Lot 949-B-1 of the subd. plan (LRC) PSD-239538, being a portion of lot 949-B (LRC) Psd-109420, LRC Cad. Rec. No. 501 containing an area of 310 square meters. On the other hand, the Roman Catholic Bishop of Malolos, Inc., is a religious corporation sole, the purpose of which is for the administration of its temporalities. On December 22, 2010, a Deed of Donation of Real Property was executed whereby Marina de G. Sullivan transfers and conveys the above-mentioned subject property to the Roman Catholic Bishop of Malolos, Inc. 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 Roman Catholic Bishop of Malolos, 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 subject the donation of the above mentioned real property to donor's tax. cEHITA 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 Roman Catholic Bishop of Malolos, Inc. 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. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue