BIR Ruling No. 232-13

June 20, 2013 BIR RULING NO. 232-13 Section 101 (A) (3), NIRC of 1997; BIR Ruling No. 429-11; BIR Ruling No. 118-12 Missionary Servants of the Blessed Sacrament No. 25 Jaime Street, Carmel 1, Subdivision, Bahay Toro, 1100 Quezon City Attention: Sr. Rosanna Favero, MSBS Local Superior Gentlemen : This refers to your letters dated September 21, 2010 and April 4, 2013 requesting for the issuance of a Certificate of Tax Exemption from Donor's Tax on the donation of real property by The Roman Catholic Vicar Apostolic of San Jose in Mindoro, Inc. in favor of the Local Superior of the Missionary Servants of the Blessed Sacrament, Inc. pursuant to Section 101 (A) (3) of the Tax Code of 1997, as amended. DAESTI Documents submitted disclosed that The Roman Catholic Vicar Apostolic of San Jose in Mindoro, Inc. (TIN 000-541-634-000) is registered with the Securities and Exchange Commission (SEC) as a non-stock, non-profit religious corporation organized as 'corporate sole'; that the Local Superior of the Missionary Servants of the Blessed Sacrament, Inc. (TIN 004-513-831-001) is likewise a religious corporation organized and registered with the SEC as 'corporate sole; that The Roman Catholic Vicar Apostolic of San Jose in Mindoro, Inc. is the registered owner of Transfer Certificate of Title (TCT) No. T-12260, a thirteen thousand four hundred fifteen (13,415) square meter parcel of land known as Lot No. 1581-C-8-C of Subdivision Plan Psd-045110-057768 being a portion of Lot No. 1581-C-8, Psd-04-049222 (LRC) Pcs-10409 situated at Brgy. Labangan, San Jose, Occidental Mindoro (hereinafter referred to as the "subject property"); that on August 2, 2010, a Deed of Donation covering the subject property was executed by The Roman Catholic Vicar Apostolic of San Jose in Mindoro, Inc. (represented by Most Rev. Antonio P. Palang, SVD, DD, Vicar Apostolic) in favor of the Local Superior of the Missionary Servants of the Blessed Sacrament, Inc. (represented by Sr. Rosanna Favero, MSBS, Local Superior); and that there is no existing improvement on said subject property. In support of the request, the following documents are submitted: 1. Certified true copy of the SEC, Articles of Incorporation and By-Laws of The Roman Catholic Vicar Apostolic of San Jose in Mindoro, Inc. ; 2. Photocopy of the SEC, Articles of Incorporation and By-Laws of Local Superior of the Missionary Servants of the Blessed Sacrament, Inc. ; 3. Certified faithful reproduction of the original Deed of Donation; 4. Certified true copy (CCV) of TCT No. T-12260 of the Quezon City Registry of Deeds; 5. Certified true copy of the tax declaration of the subject property; 6. Photocopy of the Certificate of No Improvement from the Office of the Municipal Assessor; 7. Photocopy of the Certificate of Exemption from payment of real property tax from the Office of the Municipal Assessor; 8. Copy of the Donor's Tax Return; and 9. Photocopies of the BIR Certificates of Registration of the donor and donee. 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 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 thirty percent (30%) of said gift shall be used by the donee for administration purposes. (BIR Ruling No. 429-11 dated November 4, 2011) Inasmuch as the Local Superior of the Missionary Servants of the Blessed Sacrament, Inc. is a religious corporation organized as a 'corporate 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 30% of said gift shall be used by the donee for administration purposes. Since this is a 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 be a ground for the revocation of the donation pursuant to Article 764 of the New Civil Code. (BIR Ruling No. 429-11 dated November 4, 2011) ISCaTE Moreover, 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. 429-11 dated November 4, 2011) 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 Revenue Regulations No. 2-98, as amended. Also, if the Local Superior of the Missionary Servants of the Blessed Sacrament, 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. (BIR Ruling No. 118-12 dated February 22, 2012) 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.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue