BIR Ruling No. 128-13

April 4, 2013 BIR RULING NO. 128-13 Sec. 101 (A) (3) of the Tax Code of 1997; BIR Ruling No. 300-2011 Atty. Geraldine E. Jorda Sto. Nio Pilgrim Center Osmea Blvd. cor. Burgos St. Cebu City Ma'am : This refers to your letter dated 16 August 2011 indorsed to this Office by Revenue Region No. XIII, Cebu City on September 1, 2011, requesting exemption from donor's tax on the donation of four (4) parcels of land executed by Fr. Jerome P. Mesina ("Donor") in favor of the Prior Provincial of the Augustinian Province of Santo Nio de Cebu-Philippines, Inc. ("Donee"). Documents submitted show that on 16 June 2011, the Donor, with Tax Identification No. (TIN) 232-292-311, executed a Deed of Donation in favor of the Donee, a non-stock, non-profit religious corporation sole, with TIN 000-655-179, represented by Fr. Eusebio B. Berdon, OSA, over four (4) parcels of land located at Tolotolo, Consolacion, Cebu, particularly described as follows: 1. A parcel of residential land, described as Lot No. 12000, Cad 545-D (New), containing an area of 10,747 sq.m., more or less, covered by Original Certificate of Title (OCT) No. OP-56634; 2. A parcel of residential land, described as Lot No. 7623, Cad 545-D (New), containing an area of 10,845 sq.m., more or less, covered by Original Certificate of Title (OCT) No. OP-56635; 3. A parcel of residential land, described as Lot No. 7636, Cad 545-D (New), containing an area of 25,882 sq.m., more or less, covered by Original Certificate of Title (OCT) No. OP-56707; and DCASIT 4. A parcel of residential land, described as Lot No. 7942, Cad 545-D (New), containing an area of 4,349 sq.m., more or less, covered by Original Certificate of Title (OCT) No. OP-56708. that while the above described properties are registered in the name of the Donor, the true and beneficial owner thereof is the Donee; that as an act of liberality in order to formalize the ownership of the said properties, the Donor voluntarily and freely conveyed by way of donation unto the Donee the said four (4) parcels of land. In support of the request, the following documents were submitted: 1. Letter request for exemption; 2. Certified True Copy of the Certificate of Registration with the Securities and Exchange Commission (SEC) and Articles of Incorporation of the Donee; 3. Duplicate Original of the Deed of Donation; 4. Certified True Copy of the donor's tax return; 5. Certified True Copy of the Original Certificates of Title of the donated lots; 6. Certified True Copy of the Tax Declarations of the donated lots; and 7. Certified True Copy of BIR Certificate of Registration of the Donee. 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 is 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. Inasmuch as the Prior Provincial of the Augustinian Province of Santo Nio de Cebu-Philippines, Inc. is a religious corporation sole, 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 donation 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 TCT/OCT because failure to comply with the said condition shall be a ground for the revocation of the exemption from the payment of the donor's tax. Section 185 of Revenue 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 aforesaid 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. 300-2011 dated August 12, 2011) Furthermore, if the donor is a 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, as amended, the same being considered a transaction deemed sale. But, if the donor is not a VAT-registered person, the donation is exempt from VAT. THIcCA It is to be noted that if the same property acquired by donation is 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 Prior Provincial of the Augustinian Province of Santo Nio de Cebu-Philippines, Inc. donates the same property 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