BIR Ruling No. 199-14

June 17, 2014 BIR RULING NO. 199-14 Section 101 (A) (3) of the Tax Code of 1997, as amended; Section 4.106-3 of RR 16-2005; BIR Ruling No. 300-11; BIR Ruling No. 241-11; BIR Ruling No. 225-11; BIR Ruling No. 027-11; BIR Ruling No. 015-11 Philsaga Mining Corporation Phil-Japan Friendship Highway Catitipan Brgy. Panacan, Davao City Attention: Col. Samuel G. Afdal (Ret.) President Gentlemen : This refers to your letter dated 26 April 2011 requesting on behalf of PHILSAGA MINING CORPORATION for the exemption from payment of Donor's Tax relative to its donation to Philsaga High School Foundation. It is represented that PHILSAGA MINING CORPORATION, is a corporation organized and existing under the laws of the Philippines, with Taxpayer's Identification Number (TIN) 005-883-632-001; and that Philsaga High School Foundation, Inc.,a non-stock corporation organized and existing under the laws of the Philippines engaged in the operation of an educational institution and a donee institution duly accredited by the Philippine Council for NGO Certification (PCNC). It is further represented that PHILSAGA MINING CORPORATION is the owner of the following personal and real properties valued at Two Million Five Hundred Twenty Five Thousand Eight Hundred Thirty Seven and 41/100 (Php2,525,837.41) and Ten Million Nine Hundred Seventy Eight Thousand Five Hundred Twelve and 66/100 (Php10,978,512.66),respectively: EHcaAI Personal Properties Description Condition Acquisition Depreciation Value Cost (Php) Blue Multicab new 170,000.00 - 170,000.00 (Teachers' Service Vehicle) Plate # LFW-890 Chassis # DCT1T-218178 Engine # 5854795 Forward Truck (school bus) new 553,571.43 - 553,571.43 Plate # YCX-966 Chassis # FRR32LB-3005714 Engine # 6HE1-638580 Stainless Steel Water Tank new 83,928.57 - 83,928.57 Computer sets (2 units) new 33,303.57 - 33,303.57 Computer sets (6 units) new 100,178.57 - 100,178.57 LCD monitor 28" new 26,339.29 - 26,339.29 Computer set (1 unit) new 16,250.00 - 16,250.00 Drinking Fountain new 32,319.64 - 32,319.64 Photocopier (U-Bix) new 49,107.10 - 49,107.10 LCD Projector new 24,910.71 - 24,910.71 Compound Monocular Microscope new 49,107.10 - 49,107.10 Air-conditioner (2Hp, GE Brand) new 55,750.00 - 55,750.00 Electrical Transformer new 90,000.00 - 90,000.00 Total Value of Personal Property Php2,525,837.41 ============== Real Properties (Land) Land Description Area TCT Latest Tax Zonal/ and Location No. Declaration Market No. Value Lot No. 1379-A @ Bayugan 3, Rosario, 21,828 sq.m. n/a 02-0700201117 152,796.00 Agusan del Sur Lot No. 1379-B @ Bayugan 3, Rosario, 3,560 sq.m. n/a 02-0700201117 24,920.00 Agusan del Sur Lot No. 1379-C @ Bayugan 3, Rosario, 9,937 sq.m. n/a 02-0700201117 69,559.00 Agusan del Sur Lot No. 1379-E @ Bayugan 3, Rosario, 472 sq.m. n/a 02-0700201121 3,304.00 Agusan del Sur Lot No. 1379-F @ Bayugan 3, Rosario, 2,698 sq.m. n/a 02-0700201121 18,886.00 Agusan del Sur Lot No. 1379-G @ Bayugan 3, Rosario, 1,404 sq.m. n/a 02-0700201121 9,828.00 Agusan del Sur Lot No. 1379-H @ Bayugan 3, Rosario, 18,315 sq.m. n/a 02-0700201121 128,205.00 Agusan del Sur Total Value of Real Property-Land Php407,498.00 ============ Real Properties (Improvements) Description Location Latest Tax Value Dec. School Building Bayugan 3, Rosario, Agusan del n/a 6,476,770.08 (2 Storey/4 classroom) Sur Amphitheater Bayugan 3, Rosario, Agusan del n/a 1,611,928.56 Sur Teacher's Cottage Bayugan 3, Rosario, Agusan del n/a 2,217,405.62 Sur Land Improvements Bayugan 3, Rosario, Agusan del n/a 179,884.51 (front of 2 storey bldg.) Sur School Gate Bayugan 3, Rosario, Agusan del n/a 85,025.89 Sur Total Value of Real Property-Improvements Php10,571,014.66 ============= and that a Deed of Donation dated March 17, 2011 was executed wherein PHILSAGA MINING CORPORATION, represented by its President, Samuel G. Afdal, donated the abovementioned lands, buildings, structures and other facilities to Philsaga High School Foundation, Inc.,as represented by its over-all Administrator, Victor P. Salvado. In support of its request, PHILSAGA MINING CORPORATION submitted the following documents: 1) Letter request for tax exemption; 2) Duplicate original copy of the notarized Deed of Donation with accompanying Secretary's Certificate of both PHILSAGA MINING CORPORATION and Philsaga High School Foundation, Inc.,and Certificate of Donation; 3) Affidavit declaring that the real properties donated are unregistered lands and have not been covered under the Torrens System, which explains the lack or absence of any transfer certificate of titles; 4) Original certified true copies of the latest Tax Declarations of the properties donated; TEHDIA 5) Original certified true copy of the BIR Certificate of Registration certifying that Philsaga High School Foundation, Inc. is duly accredited by the Philippine Council for NGO Certification (PCNC); 6) Original copy of Certifications from the Municipal Assessor's Office of the Municipality of Rosario, Agusan del Sur on the fair market value and assessed value of Lot 1739 and Lot 1380; 7) Original copy of the subdivision and sketch plans of Lot 1739 and Lot 1380; 8) Certified true copy of Amended Articles of Incorporation of Philsaga High School Foundation, Inc.; 9) Certified true copy of Amended By-laws of Philsaga High School Foundation, Inc.; 10) Original copy of Certification issued by DEPED Region XIII dated May 24, 2012 certifying that Palm Country Learning Center Foundation, Inc.,which was renamed Philsaga High School Foundation, Inc. was issued a Government Recognition with No. 002, S. 1995; 11) Certified true copy of Government Permit for Establishment of Private High School, with No. IV-A-4, S.2012, signed on May 29, 2012 by the OIC, Office of the Regional Director, DEPED Region XIII Gloria D. Benigno, Ph.D.,CESO IV; 12) Certified true copies of the 1st and 2nd Endorsements relative to the issuance of the Government Permit in the name of Philsaga High School Foundation (formerly Palm Country Learning Center Foundation, Inc.) with No. IV-A-4, S.2012, signed on May 29, 2012 by the OIC, Office of the Regional Director, DEPED Region XIII Gloria D. Benigno, Ph.D.,CESO IV; DCASEc 13) Certified true copies of 1st Endorsement relative to the issuance of Government Permit in the name of Philsaga High School Foundation (formerly Palm Country Learning Center Foundation, Inc.) signed on May 28, 2012 by the Schools Division Superintendent of DEPED Caraga Region, Division of Agusan del Sur, Ms. Crucita ZM Taala. In reply, please be informed that gifts in favor of 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 thirty percent (30%) of said gift shall be used by the donee for administration purposes. Inasmuch as Philsaga High School Foundation, Inc. is a donee institution duly accredited by the Philippine Council for NGO Certification (PCNC), 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 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 title because failure to comply with the said condition shall result in subjecting the donation 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. IaEScC However, following Section 4.106-3 of Revenue Regulations (RR) No. 16-2005, "if property transferred is one for sale, lease or use in the ordinary course of trade or business and the transfer constitutes a completed gift, the transfer is subject to Value-Added Tax (VAT) as a deemed sale transaction pursuant to Sec. 4.106-7 (a) (1) of these Regulations". 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