BIR Ruling No. 254-12

April 20, 2012 BIR RULING NO. 254-12 Sec. 101 (A) (3) of the Tax Code of 1997; BIR Ruling No. 300-2011 Roman Catholic Archbishop of Cagayan de Oro, Inc. Archbishop Palace Cagayan de Oro City 9000 Attention: Most Rev. Antonio J. Ledesma, S.J. Archbishop Gentlemen : This refers to your letter dated January 7, 2011, endorsed to this Office by Revenue Region No. 16 on April 14, 2011, relative to the request of Auxilium A. Pagapular, Ma. Teresa P. Tanaka, Mary Ann P. Sabunod, Arlene P. Naive and Rachel P. Bunani (collectively referred herein as the "Donors") for confirmation of opinion that the donation of a parcel of land to the Roman Catholic Archbishop of Cagayan de Oro, Inc. is exempt from the donor's tax. It is represented that the Donors executed a Deed of Donation in favor of the Roman Catholic Church (Immaculate Conception Parish),Jasaan, Misamis Oriental (the "Donee"),represented by Archbishop Antonio J. Ledesma, S.J.,over a parcel of land covered by Original Certificate of Title (OCT) No. P-30409 containing an area of fourteen thousand two hundred ninety nine (14,299) square meters, situated at Upper Poblacion, Jasaan, Misamis Oriental; that the Donors, as an act of liberality and generosity, voluntarily and freely give, transfer and convey by way of donation unto the Donee the subject property, free from all liens and encumbrances; and that the Donee and the Roman Catholic Archbishop of Cagayan de Oro, Inc. refer to one and the same entity duly registered with the Securities and Exchange Commission (SEC) bearing SEC Registration No. 889 and with Tax Identification Number (TIN) 004-988-917. 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 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 30% of said gift shall be used by the donee for administration purposes. TaSEHC Inasmuch as Roman Catholic Archbishop of Cagayan De Oro, 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 donation 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 TCT/OCT because failure to comply with the said condition shall subject the donation to donor's tax. Section 185 of Revenue 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 aforesaid 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. 300-2011 dated August 12, 2011) Furthermore, if the donor is a VAT-registered person and the donation is an ordinary asset, the donation is subject to VAT pursuant to Section 4.106-7 of Revenue Regulations (RR) No. 16-2005, as amended, the same being considered a transaction deemed sale. But, if the donor is not a VAT-registered person, the donation is exempt from VAT. 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 RR No. 2-98, as amended. If the Roman Catholic Archbishop of Cagayan De Oro, Inc. donates the same property donated to it to a non-exempt donee, the Roman Catholic Archbishop of Cagayan De Oro, Inc. 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. aIcTCS Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue