BIR Ruling No. 303-15

September 9, 2015 BIR RULING NO. 303-15 Section 101 (A) (2) of Tax Code of 1997; BIR Ruling No. 387-11; BIR Ruling No. 300-11; BIR Ruling No. 074-10 Ms. Remedios M. Cawis Mr. Ira Eric M. Cawis Camp 7, Baguio City Gentlemen : This refers to your letter dated March 23, 2012 duly indorsed by Revenue Region No. 2-Baguio City requesting for exemption from the payment of donor's tax on the donation of land in favor of the Province of Benguet. It is represented that Remedios M. Cawis and Ira Eric M. Cawis, (Donors) are the registered owners of a parcel of land, with an area of Two Thousand Twelve (2,012) square meters covered by Transfer Certificate of Title No. (TCT) T-30771 designated as Lot B-5 of the subd. plan (LRC) PSD-217540, being a portion of Lot B (LRC) Pss-2157, LRC Rec. No. F Patent situated in the Barrio of Pico, Municipality of La Trinidad, Province of Benguet, Island of Luzon. On March 7, 2012, Remedios M. Cawis and Ira Eric M. Cawis, through their Attorney-in-Fact, Odemar M. Cawis, executed a Deed of Donation in favor of Province of Benguet, conveying a pathway with an area of 137 sq.m. and 79 sq.m. of Lot B-5-C. The Province of Benguet (Donee) , a public corporation duly created and existing under and by virtue of the laws of the Republic of the Philippines, herein represented by its Chief Executive, the Honorable Governor Nestor B. Fongwan, with office address at the Provincial Capitol, La Trinidad, Benguet. The Sangguniang Panlalawigan of the Province of Benguet in Resolution No. 12-214 dated August 22, 2012 has accepted the donation and authorized Gov. Nestor B. Fongwan to sign the Deed of Donation. In reply, please be informed that Section 101 (A) (2) of the Tax Code of 1997 provides, viz. : "Sec. 101. Exemption of Certain Gifts . The following gifts or donations shall be exempt from the tax provided for in the Chapter: (A) In the Case of Gifts Made by a Resident. (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;" Under the Deed of Donation, the Donors out of pure liberality and generosity, transfers, convey and deliver by way of donation, unto the donee, the following: AaCTcI 1. The pathway with an area of 137 square meters; 2. The 79 square meter portion left out in Lot B-5-C after the donee acquired 732 square meters in the same Lot B-5-C. Considering that the aforestated properties were donated in favor of the Province of Benguet, a political subdivision of the Government such donation shall be exempt from the payment of the donor's tax pursuant to Section 101 (A) (2) of the Tax Code of 1997, as amended. (BIR Ruling No. 074-10 dated September 15, 2010) 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. 387-11 dated October 18, 2011 and BIR Ruling No. 300-11 dated May 12, 2011) However, if the same property acquired by gift 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 40, 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. If the Province of Benguet 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. 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