BIR Ruling No. 097-13

March 20, 2013 BIR RULING NO. 097-13 Sec. 101 (A) (3) of the Tax Code of 1997, as amended; BIR Ruling No. 300-2011 San Jose Investments & Realty Corp. 103 Remarville Ave., Bagbag Novaliches, Quezon City Attention: Carmencita D. Katigbak Authorized Signatory/Director Gentlemen : This refers to your letter dated June 04, 2010 requesting exemption from donor's tax on the donation of various parcels of land made by San Jose Investments & Realty Corp. in favor of Tany Foundation, Inc. pursuant to Sec. 101 (A) (3) of the Tax Code of 1997, as amended. cIHSTC Documents submitted show that San Jose Investment and Realty Corporation, with Tax Identification Number (TIN) 000-815-145-000, is a real estate company/dealer duly organized and existing under the laws of the Republic of the Philippines, with principal address at 103 Remarville Avenue, Bagbag, Novaliches, Quezon City; that, on the other hand, Tany Foundation, Inc., with TIN 006-606-663, is a non-stock, non-profit organization established primarily for charitable purposes; that it is duly registered with the Securities and Exchange Commission (SEC) bearing SEC Certificate of Registration No. CN200700858; and that it is also accredited with the Philippine Council for NGO Certification (PCNC) and Certified by this Office as Donee Institution per BIR Certificate of Registration No. 001-2010 dated February 22, 2010. On April 7, 2010, San Jose Investment and Realty Corporation executed a Deed of Donation in favor of Tany Foundation, Inc. over twenty three (23) residential lots, with all the buildings and improvements found therein, covered by Transfer Certificates of Title Nos. T-169100 (M), T-169102 (M), T-169104 (M), T-169106 (M), T-169108 (M), T-169110 (M), T-169112 (M), T-169114 (M), T-169125 (M), T-169135 (M), T-169137 (M), T-169139 (M), T-169141 (M), T-169143 (M), T-169145 (M), T-169149 (M), T-169150 (M), T-169151 (M), T-169152 (M), T-169153 (M), T-169154 (M), T-169155 (M) and T-169156 (M), all situated in Mountain View Subdivision, San Jose del Monte, Bulacan, containing an aggregate area of two thousand nine hundred thirty nine (2,939) square meters. 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 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 30% of said gift shall be used by the donee for administration purposes. Inasmuch as Tany Foundation, Inc. is a charitable 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 donation 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 TCT/OCT because failure to comply with the said condition shall subject the donation to donor's tax. Section 185 of Revenue 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 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. 300-2011 dated August 12, 2011 ) EHSTDA However, since San Jose Investment and Realty Corporation is a VAT-registered person and the donation involves ordinary assets, 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. 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 RR No. 2-98, as amended. If Tany Foundation, Inc. donates the same property donated to it to a non-exempt donee, Tany Foundation, Inc. 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