BIR Ruling No. 098-14

March 19, 2014 BIR RULING NO. 098-14 Section 101 (A) (3) of the Tax Code of 1997, as amended; BIR Ruling No. 225-2011; and BIR Ruling No. 241-2011 Tolosa Romulo Agabin Flores & Enriquez Law Offices 8th Floor, GMA Lou-Bel Plaza, 7514 Bagtikan Street corner Chino Roces Ave., San Antonio Village, Makati City 1203 Metro Manila, Philippines Attention: Chrisgene A. Castillo Legal Counsel Gentlemen : This refers to your letter dated November 6, 2012, requesting on behalf of your clients, De La Salle University Science Foundation, Inc. (DLSU-Science Foundation) and De La Salle Santiago Zobel School, Inc. (DLS-Zobel) , for exemption from the payment of donor's tax relative to the donations of DLSU-Science Foundation in favor of DLS-Zobel. Documents submitted disclosed that the DLSU-Science Foundation , with Tax Identification No. 001-229-727-000, is a non-stock, non-profit organization registered with the Securities and Exchange Commission (SEC) under SEC Registration No. 35987 and principal place of business at Room 206 John Hall Building, 2401 Taft Avenue, Ermita Manila; that DLS-Zobel , with TIN No. 002-856-492, is a non-stock, non-profit educational institution registered with the Securities and Exchange Commission under SEC Registration No. 69997 and principal place of business at University Avenue, Ayala Alabang Village, Alabang, Muntinlupa City; that Deed of Donation dated June 19, 2012 was executed by DLSU-Science Foundation as donor DLS-Zobel , involving several parcels of land covered by Transfer Certificate of Title No. 140211, consisting Twenty Thousand Three Hundred Thirty Six (20,336) square meters in Ayala Alabang Village, Muntinlupa City including all the buildings, improvements, equipment, furniture and fixtures found therein and with technical descriptions described as follows: "Transfer Certificate of Title No. (140211) 049620- A parcel of land (Lot 5-A of the subd. plan (LRC) Psd-284835, approved as a non-subd. project, being a portion of Lot 5, Blk. 4, Pcs-04-000105, LRC Record No. 6137) situated in the Bo. of Alabang, Mun. of Muntinlupa, MM., Island of Luzon. Bounded on the NE., pts. 1 to 2 by Lot 5-B of the subd. plan, on the SE., pts. 2 to 5 by Lot 6, Blk. 4, Pcs-04-000105 and beyond by Creek 8.00 m. to 11.00 m. wide, on the SW., pts. 5 to 6 by Road Lot 24, Pcs-04-000105, (20.00 m. wide), on the NW., pts. 6 to 12 and 12 to 1 by Road Lot 26, Pcs-04-000105 (14.00 m. wide). Beginning at a pt. marked "1" on plan, being S. 48 deg. 52'W. 2268.07 m. from Mon. 33, Muntinlupa Estate; thence S. 34 deg. 45'E., 98.61 m. to pt. 2; thence S. 60 deg. 57'W., 3.32 m. to pt. 3; thence N. 78 deg. 55'W., 49.87 m. to pt. 4; thence S. 54 deg. 16'W., 32.78 m. to pt. 5; thence N. 35 deg. 44'W., 54.71 m. to pt. 6; thence N. 24 deg. 29'W., 2.34 m. to pt. 7; thence N. 1 deg. 59'W., 2.34 m. to pt. 7; thence N. 1 deg. 59'W., 2.34 m. to pt. 8; thence N. 20 deg. 31'E., 2.34 m. to pt. 9; thence N. 43 deg. 01'E., 2.34 m. to pt. 10, thence N. 54 deg. 16'E., 49.04 m. to pt. 11; thence N. 52 deg. 20'E., 8.46 m. to pt. 12; thence N. 48 deg. 27'E., 6.46 m. to the pt. of beginning, containing an area of FIVE THOUSAND EIGHTY FOUR (5,084) SQUARE METERS, more or less. All pts. referred to are indicated on the plan and are marked on the ground by P.S. cyl.conc.mons. 15x60 cm. bearings true; date of orig.survey, during 1907, and that of the subd.survey, executed by Filemon C. Avelino, Geod. Engr., Dec. 29, 1978./ HADTEC A parcel of land (Lot 5-B of the subd. plan (LRC) Psd-04-000105, LRC Rec. No. 6137) situated in the Bo. of Alabang, Mun. of Muntinlupa, MM., Is. of Luzon. Bounded on the NE., pts. 6 to 7 by Lot 5-C, pts. 7 to 8 by Lot 5-D, both of the subd. plan, on the SE., pts. 8 to 9 by Lot 6, Blk. 4, Pcs-04-000105 and beyond by Creek 8.00 to 11.00 m. wide; on the SW., pts. 9 to 1 by Lot 5-A of the subd. plan & on the NW., pts. 1 to 6 by Road Lot 26, Pcs-04-000105, (14.00 m. wide). Beginning at a pt. marked "1" on plan, being S. 48 deg. 52'W., 2268.07 m. from Mon. No. 33, Muntinlupa Estate; thence N. 44 deg. 34'E., 8.46 m. to pt. 2; thence N. 40 deg. 42'E., 8.46 m. to pt. 3; thence N. 36 deg. 49'E., 8.46 m. to pt. 4; thence N. 32 deg. 56'E., 8.46 m. to pt. 5; thence N. 31 deg. 00'E., 16.00 m. to pt. 6; thence S. 34 deg. 58'E. 78.29 m. to pt. 7; thence S. 34. Deg. 58'E., 41.20 m. to pt. 8; thence S. 60 deg. 57'W., 47.63 m. to pt. 9; thence N. 34 deg. 45'W., 98.61 m. to the pt. of beginning, containing an area of FIVE THOUSAND EIGHTY FOUR (5,084) SQ. METERS, more or less. All pts. referred to are indicated on the plan and are marked on the ground as follows: points 1 to 5 by Old P.S. and the rest by P.S. cycl.conc.mons. 15x60 cm. bearings true; date of orig.survey, during 1907, and that of the subd.survey, executed by Filemon C. Avelino. Geod. Engr. Dec. 29, 1978./ DTESIA A parcel of land (Lot 5-C of the subd. plan (LRC) Psd-284835, approved as a non-subd. project, being a portion of Lot 5, Blk. 4, Pcs-04-000105, LRC Rec. No. 6137) situated in the Bo. of Alabang, Mun. of Muntinlupa, MM., Is. of Luzon. Bounded on the NW., & NE., pts. 5 to 12 & 12 to 1 by Road Lot 27, Pcs-04-000105, (12.00 m. wide) on the SE., pts. 1 to 3 by Lot 5-D, on the SW., pts. 3 to 4 by Lot 5-B, both of the subd. plan. & on the NW., pts. 4 to 5 by Road Lot 26, Pcs-04-000105 (14.00 m. wide). Beginning at a pt. marked "1" on plan, being S. 47 deg. 19'W., 2148.59 m. from Mon. #33, Muntinlupa Estate, thence S. 31 deg. 00'W., 43.66 m. to pt. 2; thence S. 55 deg. 02'W., 38.91 m. to pt. 3; thence N. 34 deg. 00'W., 43.66 m. to pt. 2; thence S. 55 deg. 02'W., 38.91 m. to pt. 3; thence N. 34 deg. 58'W., 78.29 m. to pt. 4; thence N. 31 deg. 00'E., 36.47 m. to pt. 5; thence N. 42 deg. 15'E., 2.34 m. to pt. 6; thence N. 64 deg., 45'E., 2.34 m. to pt. 7; thence N. 87 deg. 15'E., 2.34 m. to pt. 8; thence S. 70 deg. 15'E., 2.34 m. to pt. 9; thence S. 59 deg. 00'E. 69.29 m. to pt. 10; thence S. 66 deg. 48'E., 4.89 m. to pt. 11; thence s. 82 deg. 24'E., 4.89 m. to pt. 12; thence N. 82 deg. 00'E., 3.56 m. to the pt. of beginning, containing an area of FIVE THOUSAND EIGHTY FOUR (5,084) SQUARE METERS, more or less. All pts. referred to are indicated on the plan and are marked on the ground as follows: points 5 to 12 by Old P.S. and the rest by P.S. cyl.conc.mons. 15x60 cm. bearings true; date of the orig.survey, during 1907, and that of the subd.survey, executed by Filemon C. Avelino, Geod. Engr. Dec. 29, 1978./ A parcel of land (Lot 5-D of the subd. plan (LRC) Psd-284835, approved as a non-subd. project, being a portion of Lot 5, Blk. 4, Pcs-04-000105, LRC Record No. 6137) situated in the Bo. of Alabang, Mun. of Muntinlupa, MM., Is. of Luzon. Bounded on the NE., pts. 6 to 7 by Lot 6, Blk. 4, Pcs-04-000105 (open space), on the SE., pts. 7 to 11 by Lot 6, Blk. 4, Pcs-04-000105 and beyond by Creek 8.00 to 11.00 m. wide), on the SW., pts. 11 to 12 by Lot 5-B, on the NW., pts. 12 to 13 and 13 to 1 by Lot 5-C, both of the subd. plan, on the NW., pts. 1 to 6 by Road Lot 27, Pcs-04-000105 (12.00 m. wide). Beginning at a pt. marked "1" on plan, being S. 47 deg. 19'W., 214859 m. from Mon No. 33, Muntinlupa Estate; thence N. 82 deg. 00'E., 1.33 m. to pt. 2; thence N. 66 deg. 25'E., 4.89 m. to pt. 3; thence N. 50 deg. 49'E., 4.89 m. to pt. 4; thence N. 35 deg. 13'E., 4.89 m. to pt. 5; thence N. 27 deg. 25'E., 17.09 m. to pt. 6; thence S. 59 deg. 22'E., 36.18 m. to pt. 7; thence S. 34 deg. 07'W., 17.10 m. to pt. 8; thence S. 34 deg. 07'W., 24.00 m. to pt. 9; thence S. 17 deg. 56'W., 41.75 m. to pt. 10; thence S. 60 deg. 57'W., 52.89 m. to pt. 11; thence N. 34 deg. 58'W., 41.20 m. to pt. 12; thence N. 55 deg. 02'E., 38.91 m. to pt. 13; thence N. 31 deg. 00'E., 43.66 m. to the pt. of beginning, containing an area of FIVE THOUSAND EIGHTY FOUR (5,084) SQUARE METERS, more or less. All pts. referred to are indicated on the plan and are marked on the ground as follows: points 2 to 10 by Old P.S. and the rest by P.S. cul.conc.mons. 15x60 cm. bearing true date of the original survey during 1907, and that of the sub.survey, executed by Filemon C. Avelino, Geod. Engr. Dec. 29, 1978." cHaCAS DLS-Zobel is duly accredited by the Philippine Council for NGO Certification (PCNC) and is registered with the BIR as a donee institution per Certificate of Registration No. 097-2007 dated October 4, 2007, valid until October 4, 2012. The donation by DLSU-Science Foundation is made under the condition that the properties are to be used actually, directly and exclusively for educational purposes which donation and condition was accepted by DLS-Zobel. In reply, please be informed that Section 101 (A) (3) of the Tax Code of 1997, as amended, 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 (3) Gifts in favor of an educational and/or charitable, religious, cultural or social welfare corporation, institution, accredited non-governmental organization, trust or philanthropic, organization or research institution or organization: Provided, However, That not more than thirty percent (30%) of said gifts shall be used by such donee for administrative purposes. . . ." Hence, in as much as the donee, DLS-Zobel , is an educational institution and that the donated properties are to be used actually, directly and exclusively for educational purposes, donation to it is exempt from the payment of 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. 225-2011 dated July 13, 2011; BIR Ruling No. 241-2011 dated July 22, 2011) The Register of Deeds shall annotate the aforementioned condition at the back of the title because failure to comply with the said condition shall be ground for the revocation of the donation pursuant to Article 764 of the Civil Code of the Philippines. Moreover, the Deed of Donation is not subject to the documentary stamp tax prescribed under Section 196 of the Tax Code of 1997, but only to the documentary stamp tax of P15.00 imposed under Section 188 of the same Tax Code. (BIR Ruling No. 225-2011 dated July 13, 2011; BIR Ruling No. 241-2011 dated July 22, 2011) It is to be noted that 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 DLS-Zobel donates the same property donated to it to a non-exempt done, it shall be liable for donor's tax pursuant to Section 98 of the Tax Code of 1997. HESIcT This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained 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