BIR Ruling No. 100-10

October 11, 2010 BIR RULING NO. 100-10 Secs. 32 (B) (3); 101 (B); BIR Ruling No. 076-89; BIR Ruling No. DA-178-96; BIR Ruling No. 239-90; BIR Ruling NSNP-(S30E-132) 649-09; BIR Ruling No. 032-94; BIR Ruling No. DA-271-98 Salvador & Associates Attorneys-at-Law 815-816, Tower One & Exchange Plaza Ayala Triangle, Ayala Avenue Makati City Attention: Atty. Gerardo V. Francisco Atty. Adan T. Delamide Gentlemen : This refers to your letter dated October 15, 2009 requesting on behalf of your client, Legionaries of Christ Pilipinas, Inc. (LCPI), for confirmation of your opinion that: 1) The donation of the Condominium Property to LCPI is not taxable income to LCPI; 2) The donation of the Condominium Property by a nonresident alien donor is not subject to donor's tax; and 3) The Deed of Conditional Donation is not subject to DST. Documents submitted disclose that Legionaries of Christ Pilipinas, Inc. (LCPI), with Taxpayer Identification No. 006-515-153, is a religious corporation affiliated with the Legionaries of Christ, a Religious Congregation of Pontifical Right recognized by the Catholic Church; 1 that Legionaries of Christ's mission is to extend the Kingdom of Christ in society according to the requirements of Christian justice and charity, and in close collaboration with the bishops and the pastoral plans of each diocese; that the Legionaries of Christ has over 800 priests and 2,500 major and minor seminarians, with houses in 22 countries; that at present, Legionaries of Christ supports several schools worldwide; that in the Philippines, the Legionaries of Christ established Everest Academy, Inc., the first catholic international school in the country; that LCPI is a non-stock and non-profit corporation organized and operated exclusively for religious purposes; that it is duly registered with the Securities and Exchange Commission ("SEC") under SEC Registration No. CN200618121 dated November 21, 2006; that no part of LCPI's net income or assets inure to the benefit of any member, organizer, officer, or any specific person; that as a non-stock corporation, LCPI does not pay any dividends; that LCPI's trustees receive no compensation; that any profit which LCPI may obtain as incident of its operations are, whenever necessary or proper, are used for the furtherance of the purposes for which LCPI was organized; that in the course of its operations, LCPI receives income from various sources, such as from gifts or donations, however, not more than thirty percent (30%) of said gifts are used by LCPI for administration purposes; that in 2008, LCPI received a donation from Maria Dolores L. Freymann, an American citizen residing in Honolulu, Hawaii of a Condominium Unit, specifically, Unit 1104, Residencia 8888 Condominium, Pearl Drive, Ortigas Center, Pasig City under Condominium Certificate of Title ("CCT") No. PT-25040 of the Registry for the City of Pasig, as well as all appurtenant rights and interests in and to Residencia 8888 Condominium and the parking space (collectively referred to as the "Condominium Property"); that the donor donated the Condominium Property to LCPI in support of LCPI's aims and objectives subject to the terms and conditions stated in the Deed of Donation; that the donor is not registered as a value-added tax (VAT) and the Condominium Property is not part of the donor's ordinary assets; and that currently, the Condominium Property is used by LCPI as temporary housing of its members, especially of foreign priests and missionaries assigned to work in the Philippines. cAHIST You now request for confirmation of your following opinions: 1. The donation of the Condominium Property to LCPI is not taxable income to LCPI; 2. The donation of the Condominium Property by a non-resident alien donor is not subject to donor's tax; and 3. The Deed of Conditional Donation is not subject to DST. In reply, please be informed as follows: 1. The donation of the Condominium Property to LCPI is not taxable income to LCPI Section 32 (B) (3) of the Tax Code specifically excludes gifts from gross income, as follows: "(B) Exclusions from Gross Income. The following items shall not be included in gross income and shall be exempt from taxation under this Title: xxx xxx xxx (3) Gifts, Bequests, and Devises. The value of property acquired by gift, bequest, devise, or descent: . . ." Therefore, the value of the Condominium Property donated by Maria Dolores L. Freymann to LCPI shall not be included in the latter's gross income and shall not be subject to income tax. 2. The donation of the Condominium Property by a non-resident alien donor is not subject to donor's tax Section 101 (B), Tax Code, specifically exempts from donor's tax gifts made by a non-resident not a citizen of the Philippines if such gifts are made in favor of a religious corporation, to wit: "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. . . . (B) In the Case of Gifts Made by a Non-resident not a Citizen of the Philippines. 1) . . . 2) Gifts in favor of an educational and/or charitable, religious, cultural or social welfare corporation, institution, foundation, 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 administration purposes." 3. The Deed of Conditional Donation is not subject to DST The BIR has consistently ruled, as in BIR Ruling No. 032-94 dated February 3, 1994, that the Deed of Donation is not subject to documentary stamp tax as follows: ITCHSa "In reply, please be informed that inasmuch as the donee is a religious institution, the aforementioned donation is exempt from the payment of donor's tax pursuant to Section 94(a)(3) of the Tax Code, as amended, subject to the condition that not more than 30% of said gift shall be used by the donee for administration purposes. Moreover, the aforesaid Deed of Donation is not subject to documentary stamp tax prescribed under Section 196 of the Tax Code as amended but only to the documentary stamp tax of P3.00 imposed under Section 188 of the same Code." As well as in BIR Ruling No. DA-271-98 dated June 26, 1998, this Office reiterated this position, to wit: "Moreover, the Deed of Donation is not subject to the documentary stamp tax as prescribed by Section 196 of the Tax Code of 1997 since the transfer is gratuitous. (Section 161, Revenue Regulations No. 26 of the Revised Documentary Stamp Tax Regulations) However, the acknowledgment of the Deed of Donation before a notary public is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the same Code. (BIR Ruling No. 065-92 dated February 26, 1992)" 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 Footnotes 1. Second Article of LCPI's Articles of Incorporation.