BIR Ruling No. 121-14

May 12, 2014 BIR RULING NO. 121-14 Section 101 (A) (3) of Tax Code of 1997; BIR Ruling No. 387-11; BIR Ruling No. 300-11 Samahang Bagong Buhay Foundation, Inc. SBB Center, San Antonio Village Antipolo City Attention: Fr. Leo Schmitt, SVD Executive Director Gentlemen : This refers to your undated letter requesting on behalf of Samahang Bagong Buhay Foundation, Inc. for exemption from the payment of donor's tax on the donation of land its favor of the The Society of the Divine Word, Central Province. It is represented that Samahang Bagong Buhay Foundation, Inc. is the registered owner of two (2) parcels of land: 1. Transfer Certificate of Title No. R-33206, designated as Lot 1 of the subd. Plan PCS-04-021186, being a portion of lots 1, 2, 3, 4, 5, 6, 7 & 8, PCS-04-017489, L.R.C. Rec. No. 14818, situated in Brgy. of San Roque, City of Antipolo, containing an area of One Thousand One Hundred Seventy (1,170) square meters; and 2. Transfer Certificate of Title No. 372271, designated as block 7 of the cons. Subd Plan PCS-04-015231, being a portion of the cons. of Lots-1 & 2, Psu-14279, LRC Rec. No., situated in Brgy. of San Roque, City of Antipolo, is of Luzon, containing an area of Fifteen Thousand Five Hundred Thirty (15,530) square meters. It is further represented that Samahang Bagong Buhay Foundation, Inc. with Taxpayer Identification No. 000-681-506-000, is a corporation duly organized and existing under the laws of the Republic of the Philippines and with office address at SBB Center, San Antonio Village, Antipolo City; that on the other hand, The Society of the Divine Word with Taxpayer Identification No. 031-002-930-000-000, is a domestic religious corporation duly registered with the Securities and Exchange Commission (SEC) under SEC Registration No. 91 and with office address at Catholic Trade Building, 1916 Oroquieta cor. Tayuman St., Sta. Cruz, 1003 Manila. ACcTDS On March 10, 2011, a Deed of Donation was executed whereby Samahang Bagong Buhay Foundation, Inc. transferred and conveyed the above-mentioned subject properties together with the improvements thereon to The Society of the Divine Word, Central Province under the following conditions: 1) That the property with the TCT No. R-33206 (Chapel Lot), be used for Pastoral Services of the community and will be administered by St. Arnold Janssen Parish. The kinder school will take care of the basic educational need of the youth. Provided, not more than 30% of said gifts will be used by such DONEE for administration purposes; and 2) That the property with TCT No. 372271 (Sta. Monica Retreat House) will be used as Spiritual Retreat Facility administered by St. Arnold Janssen Parish, provided not more than 30% of said gifts will be used by such DONEE for administration purposes. That on March 19, 2014, a sworn certification stating that the name "Society of the Divine Word-Central Province" as mentioned in the Deed of Donation is identical with the institution mentioned in the Articles of Incorporation namely, "Society of Divine Word'' (but without Central Province). In reply, please be informed that gifts in favor of an educational and/or charitable, religious, cultural or social welfare corporation, institution, accredited nongovernment organization, trust or philanthropic organization or research institution or organization are 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 The Society of the Divine Word, Central Province is a religious organization, 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. 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) SCDaET However, if the same property acquired by gift is subsequently conveyed by way of sale or exchange, the sale 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. ( Revenue Memorandum Circular No. 007-12 ). If the The Society of the Divine Word, Central Province 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