Donation of Road Lots to the Government by a Homeowners Association is Not Exempt from Payment of Donor's Tax

November 12, 1991 BIR RULING NO. 248-91 94 000-00 248-91 Gentlemen : This refers to your letter dated September 3, 1990 requesting exemption from the payment of donor's tax the donation by the Municipality of San Juan of twenty-eight (28) parcel of road lots situated at North Greenhills otherwise known as Greenhills, Phase IV, San Juan, Metro Manila, in your favor on October 25, 1987. It is represented that you are an association of lot owners and homeowners in North Greenhills incorporated as a non-stock, non-profit corporation duly organized and existing under the laws of the Philippines and registered with the Securities and Exchange Commission; that the purposes for which you were organized is to promote the best interests, general welfare, prosperity and safeguard the well-being of the owners, lessees, and occupants of the property in North Greenhills; that no part of your net income inures to the benefit of any individual member or resident; that originally, the aforesaid donated road lots were donated by the subdivision developer, Ortigas & Co. Ltd. in your favor by virtue of a deed of donation executed on August 31, 1976; that you accepted the said donation on September 1, 1976; that subsequently, however, by an instrument dated December 21, 1978, Ortigas & Co. Ltd. again donated the said road lots to the Municipality of San Juan on December 17, 1978; that you are considering such donation to the Municipality of San Juan to be void as the said road lots were previously donated in your favor; that on October 25, 1987, as aforesaid, a deed of donation involving the same road lots was executed in your favor by the Municipality of San Juan, which deed shall be registered with the Register of Deeds of Pasig, Metro Manila, after the titles to the road lots have been reconstituted; and that you are of the opinion that the donation in your favor by the Municipality of San Juan on October 25, 1987 is exempt from the payment of the donor's tax. cdtech In reply, please be informed that under Section 94 of the Tax Code, as amended, in case of gifts made by a resident only the following shall be exempt from the Donor's Tax: (1) Dowries or gifts made on account of marriage and before its celebration or within one year thereafter by parents to each of their legitimate, recognized natural, or adopted children to the extent of the first ten thousand pesos; (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; and (3) Gifts in favor of an education and/or charitable, religious, cultural or social welfare corporation, institution, foundation, trust or philanthropic organization or research institution or organization, provided, that not more than thirty per centum of said gifts shall be used by such donee for administration purposes. Such being the case, and since a homeowner association like you is not among those in whose favor donation or gifts made are exempt under the aforesaid Section of the Tax Code, and considering that it is a cardinal rule in taxation that exemptions is therefrom are highly disfavored in law and he who claims tax exemption must be able to justify his claim or right; the exemption cannot be established by mere implication but it must be clearly expressed (Wonder Mechanical Engineering Corporation vs. Court of Tax Appeals, et al., 64 SCRA 555), your request that the donation in your favor of the 28 road lots by the Municipality of San Juan on October 25, 1987 be exempt from the payment of the donor's tax imposed under Section 91 of the Tax Code is hereby denied for lack of legal basis. cdti Very truly yours, (SGD.) JOSE U. ONG Commissioner