BIR Ruling No. 100-13

March 20, 2013 BIR RULING NO. 100-13 Section 101 (A) (3) of Tax Code of 1997; RMC No. 007-12; RR No. 7-2003; BIR Ruling No. 387-11; BIR Ruling No. 300-11 Marian Handmaids of the Eucharist, Inc. 27 Jingco St. Philam Village Las Pias City Attention: Sr. Angelita Yamomo Chairman of the Board Gentlemen : This refers to your letter dated August 22, 2012 requesting for exemption from payment of donor's tax on the donation of your land in favor of the SUPERIOR OF THE SISTERS OF THE HOLY CROSS, INC. It is represented that MARIAN HANDMAIDS OF THE EUCHARIST, INC. is the registered owner of a parcel of land with improvement covered by Transfer Certificate of Title (TCT) No. T-116885 designated as Lot 16, Blk. 32 of the subd. Plan (LRC) Psd-CAR-105189 being a portion of Phase 2, (LRC) Pcn-383, LRC Rec Nos. 17409, N-28359, 4661, N-24529, N-28436, 25627, 26089, 27318, and N-28358) situated in the Bo. of Pamplona, Municipality of Las Pias, Prov. of Rizal, Island of Luzon, containing an area of FOUR HUNDRED SIXTEEN (416) square meters and a parcel of land covered by Transfer Certificate Title (TCT) No. 232684 designated as Lot 2-B-1-B, Psd-06-032353, being a portion of Lot 2-B-1, Psd-063011-026662),situated in Brgy. San Enrique, Mun. of Buenavista, Prov. of Guimaras, Island of Guimaras, containing an area of TWENTY THOUSAND (20,000) square meters, more or less. On the other hand, SUPERIOR OF THE SISTERS OF THE HOLY CROSS, INC.,is a religious corporation sole, the purpose of which is for the administration of its temporalities and management of its affairs, estate and properties. On September 03, 2012, a Deed of Donation of Real Property was executed whereby MARIAN HANDMAIDS OF THE EUCHARIST, INC. transfer and convey the above-mentioned subject properties to SUPERIOR OF THE SISTERS OF THE HOLY CROSS, INC. In reply, please be informed that gifts in favor of religious corporation 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. (BIR Ruling No. 387-11 dated October 18, 2011 and BIR Ruling No. 300-11 dated May 12, 2011) Inasmuch as SUPERIOR OF THE SISTERS OF THE HOLY CROSS, INC. is a religious corporation, 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. ACaEcH Therefore, the donation of real property by MARIAN HANDMAIDS OF THE EUCHARIST, INC. to SUPERIOR OF THE SISTERS OF THE HOLY CROSS, INC. is exempt from donor's tax. Moreover, 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 or exchange will be subject to capital gains tax based on the gross selling price or current fair market value as determined in accordance with Section 6 (E) of the Tax Code of 1997, whichever is higher, of such land and/or building pursuant to Section 27 (D) (5) of the same Code (Section 4 (c) (i), Revenue Regulations No. 7-2003) . Additionally, Section 30 of the Revenue Regulations No. 2, as amended, provides, among others, that the income of such tax-exempt corporation which is considered as income from its properties, real or personal, includes profits from the sale of property. In other words, the sale by SUPERIOR OF THE SISTERS OF THE HOLY CROSS, INC. of its real property shall be subject to the corresponding income tax imposed under 1997 Tax Code, as amended. (Revenue Memorandum Circular No. 007-12) If the SUPERIOR OF THE SISTERS OF THE HOLY CROSS, 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