BIR Ruling No. 108-13

March 21, 2013 BIR RULING NO. 108-13 Section 101 (A) (2) of the Tax Code of 1997; BIR Ruling No. 283-12; BIR Ruling No. 499-11 Cityland Development Corporation 2/F Cityland Condominium 10 Tower I, 156 H.V. dela Costa Street, Makati City Attention: Mr. Rudy Go Vice President Gentlemen : This refers to the Memorandum of GS Conchita M. Ladrera, Revenue District Office No. 50, South Makati, dated October 2, 2012, referring the letter of Cityland Development Corporation dated August 17, 2011, requesting for confirmation on the exemption of Donor's Tax relative to the Deed of Donation made by Cityland Development Corporation to Barangay Lancaan II, Dasmarias, Cavite. Documents submitted show that Cityland Development Corporation (hereinafter referred to as "Donor") with Taxpayer's Identification No. (TIN) 000-527-103-000, is a corporation organized and existing under Philippine laws and represented by its President, Mr. Josef C. Gohoc, who was duly authorized by the Board of Directors of the corporation to execute the Deed of Donation; that the donee, Barangay Lancaan II, is a barangay created under the laws of the Republic of the Philippines, located in Dasmarias, Cavite, and is represented by its Barangay Captain, Mr. Danilo Laudato; that the Donor is the registered owner of two (2) parcels of land covered by Transfer Certificates of Title (TCT) Nos. T-129850 (290 sq.m.) and T-130397 (200 sq.m.),respectively, located within Greenbreeze Village I, in Barangay Lancaan II, Dasmarias, Cavite; that on October 20, 2011, a Deed of Donation was executed by and between Cityland Development Corporation and Barangay Lancaan II over the afore-mentioned two (2) parcels of land; that a portion of said lots is being used as access roads by the public; and that for the rest of the said lots, the donee or its assigns may put up any structure for public purpose; and that the donee has accepted the donation as embodied in the Deed of Donation dated October 20, 2011. aHTcDA In reply, please be informed that Section 101 (A) (2) 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 (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; and xxx xxx xxx." The donation by Cityland Development Corporation to Barangay Lancaan II, Dasmarias, Cavite is exempt from donor's tax in view of Section 101 (A) (2) of the Tax Code of 1997, as amended, which provides that 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 shall be exempt from tax. Moreover, the aforesaid Deed of Donation is not subject to documentary stamp tax under Section 196 of the Tax Code of 1997, as amended, but only to the documentary stamp tax of P15.00 on certification under Section 188 of the same Code. (BIR Ruling No. 283-2012 dated April 25, 2012) The donation is, however, subject to value-added tax (VAT) since the donor is a vat-registered real estate developer and the donated properties are deemed ordinary assets. In BIR Ruling No. 499-2011 dated December 15, 2011 ,this Office ruled that: "If the donor is a Value-Added Tax (VAT) registered person and the donation is an ordinary asset, the donation is subject to VAT pursuant to Section 4.106-7 of Revenue Regulations (RR) No. 16-2005, the same being considered a transaction deemed sale, but the input VAT attributed to the VAT portion of the cost of the donation should be deducted from accumulated input VAT of the donor. If the donor is not a VAT registered person, the donation is exempt from VAT." HSCATc "If the same properties acquired by gift are 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 the Barangay donates the same properties donated to it to a non-exempt donee, 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