Cash Donation to Domestic Corporation to Be Held in Trust for Minors Not Subject to Tax

August 6, 1999 BIR RULING NO. 115-99 60, 98, 104-115-99 Quisumbing Torres & Evangelista Attorneys at Law 11 th Floor, Pacific Star Building Makati Ave., Cor. Sen. Gil J. Puyat Ave. Makati City Attention: Atty . Jallica D . Tan and Atty . Leo G . Dominguez Gentlemen: This refers to your letter dated June 19, 1998 requesting for a ruling on the tax consequence of a proposed donation of cash money by a non-resident foreign corporation to a domestic corporation, to be held in trust for the benefit of two (2) resident minors who are Philippine citizens and the subsequent transfer of the trust assets from the trustee to the beneficiaries. In reply, please be informed that pursuant to Section 98 of the Tax Code of 1997, a donor's tax shall be levied, assessed, collected and paid upon the transfer by any person, resident or non-resident, of the property by gift. The said tax shall apply whether the transfer is in trust or otherwise, whether the gift is direct or indirect and whether the property is real or personal, tangible or intangible. However, where the donor is a non-resident foreign corporation, its real or personal property so transferred which are situated outside the Philippines shall not be included as part of its gross gift pursuant to Section 104 of the same Code. The donor's tax is an excise tax on the transfer of property. It is not a tax on property which is the subject of the gift, although it is measured by the value of that property. It is a tax on the donor's privilege to give. In view thereof, and considering that the donor is a non-resident foreign corporation, and therefore beyond the jurisdiction of the Philippine government to tax, this Office is of the opinion as it hereby holds that the aforementioned proposed cash donation to a domestic corporation to be held in trust for the benefit of two resident minors who are Philippine citizens shall not be subject to any Philippine tax. prLL Moreover, the subsequent transfer of the trust assets from the trustee to the beneficiaries is likewise not subject to tax. In this connection, it may be stated that should the proposed donation materialize, the donor is required to submit to this Office, a copy of the Deed of Donation covering the aforesaid gift with the signature of the authorized representative of the non-resident foreign corporation, notarial commission and signature of the Notary Public acknowledging the instrument of donation duly authenticated by the Philippine Consulate General of the donor's residence. 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, and/or any of the requirements set forth in this letter are not complied with, then this ruling shall be considered null and void. LexLib Very truly yours, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue