Exemption from the Donor's Tax

October 16, 1990 BIR RULING NO. 200-90 94-(a) (3) 086-89 200-90 Gentlemen : This refers to your letter dated November 22, 1989 in effect, requesting exemption from the donor's tax of the donations of real property by Agus Development Corporation in favor of Maria Montessori Foundation, Inc. aisadc The documents you submitted disclosed that per two Deeds of Donation executed on November 22, 1989, Agus Development Corporation donated two (2) parcels of land situated in Putatan, Muntinlupa, Metro Manila, covered by Transfer Certificate of Title Nos. 167289 and 167290 and issued by the Register of Deeds of Makati, Manila, in favor of Maria Montessori Foundation, Inc. thru its Vice-President Mr. Octavio V. Espiritu; that Maria Montessori Foundation, Inc. is a non-stock, non-profit corporation as expressly provided for in its Articles of Incorporation; that the Foundation is being managed by a Board of Trustees composed of five (5) members and no part of the properties or net income of the foundation shall inure to the benefit of any of the members, trustees or officers or any private individual; that the primary the education and welfare especially of underprivileged children, to foster the Montessori concept of education through the establishment of schools, to foster, promote, and encourage the improvement of education through financial support, grants, scholarships, sponsorships, donations, etc.; that the properties and income of the Foundation shall be used to further its aforementioned aims and purposes. Field verification also disclosed that in Alabang, Muntinlupa, Metro Manila, where the above-described properties are situated, the upgraded zonal value of property is P2,000.00 per square meter; thus, an area of about 10,000 square meters of land as in the case of the aforesaid donated parcels of land is P20,000,000.00 (Refer to Department Order No. 1-89 prescribing the upgraded zonal values of real properties in Paraaque, Los Baos and Muntinlupa, vol. 84, No. 49 O.G., P. 7456). In reply, please be informed that pursuant to Section 94(a) (3) of the Tax Code, as amended, gifts in favor of an educational institution which is incorporated as a non-stock entity, paying no dividends, governed by trustees who receive no compensation, and devoting all its income, whether fees or gifts, donations, subsidies or other forms of philanthropy, to the accomplishment and promotion of the purposes enumerated in its Articles of Incorporation, shall be exempt from the donor's tax provided that not more than thirty per centum of said gifts shall be used by such donee for administration purposes. Moreover, since the donee appears to be a "private foundation" within the purview of Section 29 (h)(2)(C)(i) of the Tax Code, the donation shall be fully deductible from the donor's gross income. Such being the case, since the donee, Maria Montessori Foundation, Inc., is a non-stock, non-profit educational institution within the contemplation of Section 94 (a)(3) of the Tax Code, as amended, then the aforesaid donations by Agus Development Corporation, consisting of two (2) parcel of land, are exempt from the donor's tax provided that not more than thirty per centum (30%) of said donations shall be used by the donee for administrative purposes. Moreover, the Deed of Donation is not subject to the documentary stamp tax as prescribed by Section 196 of the Tax Code on Deed of Sale and Conveyance of Real Property since the transfer is gratuitous and has no consideration. (Section 161 Revenue Regulations No. 26 of the Revised Documentary Stamp Regulations) However, the acknowledgment of the Deed of Donation before a Notary Public is subject to the documentary stamp tax of P3.00 pursuant to Section 188 of same Code. cdta Very truly yours, (SGD.) JOSE U. ONG Commissioner