BIR Ruling No. 124-11

April 12, 2011 BIR RULING NO. 124-11 Diamond Cement and Industrial Corporation-Ayala Corporation (DCIC-AC) 33-F Tower One, Ayala Triangle Ayala Avenue, Makati City Attention: Atty. Francisco A. Tiongson Corporate Counsel Gentlemen : This refers to your letter dated June 5, 2009, wherein you requested this office to confirm the validity of Regional Revenue Ruling No. 16-015(03-07) dated March 20, 2007 issued to you by Revenue Region (RR) No. 16, Cagayan de Oro City. The said ruling partially granted your request for exemption from payment of donor's tax relative to the transfer of properties to relocatees of DOTC's Laguindingan International Airport Project in Misamis Oriental. In reply, please be informed that this office is recalling Regional Revenue Ruling No. 16-015(03-07) dated March 20, 2007 issued to you by Revenue Region No. 16, Cagayan de Oro City. The aforesaid regional ruling was issued by then Regional Director Mustapha M. Gandarosa in excess of his jurisdiction, hence without force and effect. At the time said ruling was issued, the authority of Regional Directors to sign rulings was governed by Revenue Memorandum Circular (RMC) No. 3-2001 dated January 31, 2001. The relevant portions of RMC No. 3-2001 are quoted to wit: In order to expedite certain actions with established precedents, all Regional Directors, including those who are in acting capacity, are hereby given the authority to sign the following rulings, prepared by their respective Legal Divisions, issued to taxpayers under their respective jurisdictions following the latest precedent rulings and guidelines/pertinent issuances on the subject topic: ETCcSa a. Tax exemption on sale or disposition of principal residence under Section 24(D)(2) of the Tax Code of 1997 (RR 13-99, as amended by RR 14-2000); xxx xxx xxx h. Exemption from donor's tax under Section 101 of the Tax Code of 1997; xxx xxx xxx Under the aforementioned RMC, a Regional Director may issue rulings exempting a donation from donor's tax. Provided, however, that the donation meets the twin requirements the taxpayer is within his jurisdiction and the exemption falls under Section 101 of the Tax Code of 1997, as amended. In the instant case, although the property donated by Diamond Cement and Industrial Corporation-Ayala Corporation (DCIC-AC) is located within the jurisdiction of RR No. 16, Cagayan de Oro City, DCIC-AC does not appear to be a registered taxpayer of RR No. 16 as it is not domiciled in any of the municipalities and cities within the jurisdiction of RR No. 16. Hence, it cannot be said that DCIC-AC, the donor-taxpayer, is within the jurisdiction of RR No. 16 as required by RMC No. 3-2001. It is significant to note that Sec. 103 (B) if the Tax Code of 1997 requires that donor's tax be paid by the donor to an authorized agent bank, the Revenue District Officer, Revenue Collection Officer or duly authorized Treasurer of the city or municipality where the donor was domiciled at the time of the transfer. Applying the aforesaid provision, DCIC-AC is mandated to pay donor's tax where it is domiciled and not where the property is located. Consequently, not only is DCIC-AC not within the jurisdiction of RR No. 16, the transaction (donation) is also not within the primary jurisdiction of RR No. 16 for purposes of assessing the applicable taxes. We now turn to the second requirement the donation must fall under the exemptions enumerated in Sec. 101 of the Tax Code. A cursory examination of the provision shows that DCIC-AC's donation of lots to relocatees is not included among those donations exempt from donor's tax. Section 101 exempts from donor's tax dowries, donation to the national government, and donations to educational, charitable, religious, cultural or social welfare corporations. Undoubtedly, the transfer of property by DCIC-AC to relocatees is not within the ambit of Sec. 101. For reasons discussed above, this Office hereby revokes Regional Revenue Ruling No. 16-015(03-07) dated March 20, 2007, for having been issued by the Regional Director in excess of his authority. CDAHaE Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue