Atty. Florella Bandala Almarez

November 19, 2018 BIR RULING NO. 1380-18 Section 101 (A) (2) and Section 196 of the National Internal Revenue Code of 1997, as amended; PD 957, as amended by PD 1216; BIR Ruling No. 119-2013; BIR Ruling No. 489-2012; BIR Ruling No. 412-2012 Atty. Florella Bandala Almarez OIC-City Legal Officer, City Legal Office, City of Marikina Madam : This refers to your letter dated August 25, 2015, received by this Office on September 18, 2015, requesting exemption from payment of donor's tax and documentary stamp tax on the donation of road lots situated at Suburbia East Subdivision, Parang, Marikina by EEI REALTY CORPORATION (hereinafter referred to as the " DONOR ") in favor of THE CITY GOVERNMENT OF MARIKINA (hereinafter referred to as the " DONEE "). aDSIHc Documents submitted disclosed that the DONOR ,with Taxpayer Identification Number (TIN) 000-000-000-000 and with principal office at No. 12, Manggahan St.,Bagumbayan, Quezon City, is a corporation duly organized and existing under and by virtue of the laws of the Republic of the Philippines; that it is the developer of Suburbia East Subdivision, Parang, Marikina and is the registered owner of the following real estates: TCT No. Area (in sq. m.) 1 428745 1,767 2 428746 379 3 428369 41 4 428699 38 5 428747 4,509 6 428748 3,435 7 428749 2,422 8 428750 656 9 428751 656 10 428752 1,212 11 428753 1,212 12 428754 1,247 13 428755 1,575 14 428756 1,118 15 428757 576 16 428758 1,368 17 428759 910 18 428760 849 19 428761 855 20 428762 855 21 428763 905 22 428444 5,372 23 499065 792 24 499066 940 25 499067 940 26 499068 939 27 499069 263 28 499070 204 29 499071 689 30 499072 339 31 499073 122 32 499050 1,165 33 499441 370 34 428767 1,088 35 428764 4,183 that on the other hand, the DONEE , with principal office at Sta. Elena, Shoe Avenue, Marikina City, is a public corporation created under its original charter, Republic Act No. 8223; that on February 23, 2015, the DONOR ,represented by its __________, AAA, executed a Deed of Donation in favor of the DONEE ,represented by the City Mayor ,Hon. Del R. De Guzman, conveying to the latter the above-real estates; and that the DONEE accepted the donation under the conditions set forth as embodied in the same instrument. ATICcS In reply, please be informed that Presidential Decree (P.D.) No. 957, as amended by P.D. No. 1216 1 states that: "Section 2. Section 31 of Presidential Decree No. 957 is hereby amended to read as follows: "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." (Emphasis and Underscoring supplied) 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. It is noteworthy to mention that in the case of The City of Angeles vs. Court of Appeals , 2 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: ETHIDa " 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 or 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." (Emphasis and Underscoring supplied) Accordingly, since the Deed of Donation of the road lots and open spaces for adequate facilities described under PD 957, as amended by P.D. No. 1216, was executed by and between the developer, EEI REALTY CORPORATION ,in favor of THE CITY GOVERNMENT OF MARIKINA , which is a political subdivision of the Government, the aforementioned donation is exempt from the payment of donor's tax pursuant to Section 101 (A) (2) of the National Internal Revenue Code of 1997, as amended, which provides that: "SEC. 101. Exemption of Certain Gifts. The following gifts or donations shall be exempt from the tax provided for in this Chapter: xxx xxx xxx (2) Gifts made to or for the use of the National Government or any entity created by any of its agencies which is not conducted for profit, or to any political subdivision of the said Government; xxx xxx xxx" Moreover, Section 185 of Revenue Regulations No. 26, otherwise known as the Revised Documentary Stamp Tax Regulations, implementing Title VII of the National Internal Revenue Code of 1997, as amended, 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 not subject to the documentary stamp tax prescribed under Section 196 of the National Internal Revenue Code of 1997, as amended, but only to the documentary stamp tax of P15.00 imposed under Section 188 of the same Code. TIADCc This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) CAESAR R. DULAY Commissioner of Internal Revenue Footnotes 1. Defining "Open Space" in Residential Subdivisions and Amending Section 31 of Presidential Decree No. 957 Requiring Subdivision Owners to Provide Roads, Alleys, Sidewalks and Reserve Open Space for Parks or Recreational Use. 2. G.R. No. 97882, August 28, 1996.