BIR Ruling No. 096-14

March 14, 2014 BIR RULING NO. 096-14 Section 101 (A) (2); 101 (B) (1), Tax Code of 1997, as amended; Revenue Regulations No. 25-03; BIR Ruling No. 165-2012 Department of Trade and Industry 7th Floor New Solid Bldg., 357 Sen. Gil Puyat Ave., Makati City, Philippines Attention: Ms. Blesila A. Lantayona Assistant Secretary Gentlemen : This refers to your letter dated July 10, 2013 requesting a confirmation of your opinion that the donation made by the Deutsche Gessellschaft f r Internationale Zusammenarbeit (GIZ) Manila Office to the Department of Trade and Industry (DTI) last December 2012 is exempt from Donor's Tax. GIZ, a Germany-based international enterprise owned by the German Federal Government, and the DTI are partners in the technical cooperation program Private Sector Promotion-Small and Medium Enterprise Development for Sustainable Employment Program (PSP-SMEDSEP).During the course of program, GIZ purchased locally a Toyota Revo SR Manual Transmission, more specifically described as follows: Type of Body: Wagon Year Model: 2004 Chassis No.: KF82-60009551 Engine No.: 7K-0749282 Color: White Plate No.: OEV 24107 In BIR ITAD Ruling No. 37-05 dated April 28, 2005, the Bureau ruled that the sale transaction is exempt from value-added tax and ad valorem taxes (excise tax). Part of the administrative procedures of GIZ provides that all serviceable equipment and materials procured under the technical assistance programs/projects, including the above-mentioned motor vehicle, shall be turned over to the partner at the end of each program. At the end of the PSP-SMEDSEP on December 2012, GIZ turned over, by donation, to the DTI the above-described vehicle. TECIaH In reply, please be informed that donations made in favor of the Government and any of its agencies which are not conducted for profit, or to any of its political subdivisions, are exempt from the payment of the donor's tax pursuant to the provisions of Section 101 (A) (2) and Section 101 (B) (1) of the Tax Code of 1997, as amended (Tax Code),which provides: "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. xxx xxx xxx (2) Gifts made to or for the use of the National Government or any entity created by any of its agencies which is not conducted for profit, or to any political subdivision of the said Government; xxx xxx xxx (B) In the Case of Gifts Made by a Nonresident not a Citizen of the Philippines. (1) Gifts made to or for the use of the National Government or any entity created by any of its agencies which is not conducted for profit, or to any political subdivision of the said Government." Accordingly, since DTI is a government agency, the donation made by GIZ in its favor is exempt from the payment of donor's tax pursuant to the above quoted provisions. (BIR Ruling No. 165-2012 dated March 9, 2012) However, noting that the purchase of the vehicle was previously exempted from value-added tax and ad valorem tax (excise tax), DTI, not being exempt from the same, shall pay the value-added tax and the excise tax due on the transaction pursuant to Section 107 (B) of the Tax Code and Section 8 of Revenue Regulations No. 25-03, respectively. Moreover, the Deed of Donation is not subject to documentary stamp tax imposed under Section 196 of the Tax Code. However, the acknowledgment on said deed is subject to documentary stamp tax of P15.00 imposed under Section 188 of the same Code. (BIR Ruling No. 024-10 dated August 4, 2010) 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