BIR Ruling No. 175-13

May 17, 2013 BIR RULING NO. 175-13 Sec. 101 (A) (3) of the Tax Code of 1997, as amended; BIR Ruling No. 387-11; BIR Ruling No. 300-11 The Church of Malabon, Inc. 19 Liwayway Street, Acacia Malabon City Attention: Cenon C. Cruz, Jr. Elder-Trustee Gentlemen : This refers to your letter dated 05 June 2012 requesting for exemption from the payment of donor's tax on the donation of land in favor of THE CHURCH OF MALABON, INC. It is represented that Fred L. Bondoc and Thomas L. Pe, with Taxpayer's Identification Nos. (TIN) 102-260-205 and 113-586-228, respectively, are the registered co-owners of a parcel of land with improvement covered by Transfer Certificate of Title No. M-33689 known as Lot 21, Sub-block E, Block 4, situated at Brgy. Longos, Malabon City, containing an area of sixty five (65) square meters, more or less. On the other hand, THE CHURCH OF MALABON, INC., with TIN 000-907-294, is a religious institution duly organized under the laws of the Philippines, registered with the Securities and Exchange Commission (SEC) under Registration No. 69787 dated 24 September 1976, the purpose of which is for the administration of its temporalities or the management of its properties. On 11 May 2012, a Deed of Donation was executed whereby co-owners Fred L. Bondoc and Thomas L. Pe transfers and conveys by way of donation the above-mentioned subject property to THE CHURCH OF MALABON, INC. for the latter's utilization and use as a religious corporation. TCacIE In support of your request, THE CHURCH OF MALABON, INC. has submitted the following documents: 1) Letter request for tax exemption; 2) Duplicate original copy of notarized Deed of Donation dated May 11, 2012; 3) Certified true copy of TCT M-33689; 4) Certified true copy of Tax Declarations covering land and improvement; 5) Original copy of Special Resolution dated May 11, 2012; 6) Certified machine copies of SEC documents of THE CHURCH OF MALABON, INC.: a) Certificate of Incorporation; b) Articles of Incorporation; c) By-laws. 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) aEHASI Inasmuch as THE CHURCH OF MALABON, INC. 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) However, if the same property acquired by gift 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 Revenue Regulations No. 2-98, as amended. If THE CHURCH OF MALABON, INC. 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. SHTaID Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue