BIR Ruling No. 119-13

March 22, 2013 BIR RULING NO. 119-13 Section 31, PD 957, as amended by PD 1216; BIR Ruling No. 412-12 The Roman Catholic Archbishop of Manila 121 Arzobispo Street, Intramuros Manila Attention: Mr. Antonio B. Ramirez Manager Properties Administration Department Gentlemen : This refers to your letter dated February 28, 2012 requesting exemption from the payment of donor's tax on the two (2) deeds of donation executed over the same parcel of land: the first deed was executed by Manuela Corporation in favor of the Doa Manuela Subdivision Homeowners Association, Inc. (the "Association"); and the second deed was executed by the Association in favor of The Roman Catholic Archbishop of Manila. SIcCEA Documents submitted show that Manuela Corporation, a domestic corporation duly organized and existing under and by virtue of the laws of the Philippines, and with office address at Real St., Pamplona, Las Pias City, was the owner of a certain parcel of land, with Transfer Certificate of Title (TCT) No. 102012, containing an area of Two Thousand Five Hundred (2,500) square meters; that the said parcel of land was solely intended for public use, it being an open space, particularly for the religious worship of the homeowners of the Doa Manuela Subdivision; that a Deed of Conveyance, dated February 20, 1987, was executed by and between Manuela Corporation and the Association, in which the former donated to the latter the above parcel of land to be used as the site of the church; that subsequently, the same parcel of land, together with the church built thereon, was donated by the Association in favor of The Roman Catholic Archbishop of Manila through a Deed of Donation dated March 7, 2001. In reply, please be informed that a donation of a parcel of land, described as an open space, executed by the developer in favor of the homeowners' association is governed by the provisions of Presidential Decree (PD) No. 957, as amended by PD No. 1216, otherwise known as "THE SUBDIVISION AND CONDOMINIUM BUYERS' PROTECTIVE DECREE." Section 31 of the Decree provides: " Sec. 31. Roads, Alleys, Sidewalks and Open spaces. The owner as developer of a subdivision shall provide adequate roads, alleys and sidewalks. For subdivision projects one (1) hectare or more, the owner or developer shall reserve thirty percent (30%) of the gross area for open space. Such open space shall have the following standards allocated exclusively for parks, playgrounds and recreational use: (a) 9% of gross area for high density or social housing (66 to 100 family lot per gross hectare). (b) 7% of gross area for medium-density or economic housing (21 to 65 family lot per gross hectare). (c) 3.5% of gross area low-density or open market housing (20 family lots and below per gross hectare). These areas reserved for parks, playgrounds and recreational use shall be non-alienable public lands, and non-buildable. The plans of the subdivision project shall include tree planting on such parts of the subdivision as may be designated by the Authority. Upon their completion as certified to by the Authority, the roads, alleys, sidewalks and playgrounds shall be donated by the owner or developer to the city or municipality and it shall be mandatory for the local governments to accept provided, however, that the parks and playgrounds may be donated to the Homeowners Association of the project with the consent of the city or municipality concerned. No portion of the parks and playgrounds donated thereafter shall be converted to any other purpose or purposes ." (Underscoring supplied) aEHTSc Pursuant to the above-cited provisions, the roads, alleys, sidewalks and playgrounds of a subdivision project have to be donated by the owner/developer to the concerned city or municipality, and it shall be mandatory for the local government to accept the donation. Although parks and playgrounds may be donated by the owner/developer in favor of the homeowners' association, the donation must bear the approval of the concerned city or municipality. It is noteworthy to mention that in the case of The City of Angeles vs. Court of Appeals, G.R. No. 97882, August 28, 1996 , the Supreme Court had the occasion to emphasize the mandatory tenor of Section 31 of PD 957, as amended by PD 1216, relative to the need to make the donation in favor of the city or municipality, in this wise: " It is clear from the aforequoted amendment that it is no longer optional on the part of the subdivision owner/developer to donate the open space for parks and playgrounds; rather there is now a legal obligation to donate the same . Although there is a proviso that the donation of the parks and playgrounds may be made to the homeowners association of the project with the consent of the city of municipality concerned, nonetheless, the owner/developer is still obligated under the law to donate. Such option does not change the mandatory character of the provision. The donation has to be made regardless of which donee is picked by the owner/developer. The consent requirement before the same can be donated to the homeowners' association emphasizes this point. " (Underscoring supplied) Accordingly, the donation of the parcel of land, being an open space described under PD 957, executed by Manuela Corporation in favor of the Association, without or absent the consent of the city or municipality concerned, is contrary to law and thus, void under Article 1409 (1) of the New Civil Code of the Philippines. Such cannot be done since the law is clear as to whom the open spaces and other common areas may be donated, which is, the city or municipal government concerned. Accordingly, the Association cannot in turn donate the same property to The Roman Catholic Bishop of Cubao under the principle "No one can give what he does not have" (Nemo dat quod non habet) . (BIR Ruling No. 412-12 dated June 15, 2012) Based on the foregoing, your request for exemption from the payment of donor's tax cannot be granted for lack of legal basis. Please be guided accordingly. HDAECI Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue