BIR Ruling No. 412-12

June 15, 2012 BIR RULING NO. 412-12 Section 31, PD 957, as amended by PD 1216 The Roman Catholic Archbishop of Manila 121 Arzobispo Street, Intramuros Manila Attention: Mr. Antonio B. Ramirez Manager Properties Administration Department Gentlemen : This refers to your letter dated April 4, 2011 requesting exemption from the payment of donor's tax on the two (2) donations of a real property, one executed by the Philippine American Life Insurance Company, (PALICO) in favor of the Philam Homeowners Association, Inc. (the "Association"), and the other executed by the Association in favor of The Roman Catholic Bishop of Cubao. Documents submitted show that PALICO was the owner-developer of a subdivision project known as the "Philam Homes" situated in Quezon City; that a Deed of Conveyance, dated 15 May, 1986, was executed by and between PALICO and the Association, in which PALICO donated to the latter the open spaces, road lots, canals, alleys, easements, parks, playgrounds, and other common areas of Philam Homes; that subsequently, a portion, consisting of 3,953 sq. m., of the above donated lots was donated by the Association in favor of The Roman Catholic Bishop of Cubao through a Deed of Conveyance dated December 10, 2004. In reply, please be informed that the above transactions fall within the purview of the provisions of Presidential Decree (PD) No. 957, as amended by PD No. 1216, otherwise known as "THE SUBDIVISION AND CONDOMINIUM BUYERS' PROTECTIVE DECREE." Section 31 of the Decree provides: "Sec. 31. Roads, Alleys, Sidewalks and Open spaces. The owner as developer of a subdivision shall provide adequate roads, alleys and sidewalks. For subdivision projects one (1) hectare or more, the owner or developer shall reserve thirty percent (30%) of the gross area for open space, such open space shall have the following standards allocated exclusively for parks, playgrounds and recreational use: (a) 9% of gross area for high density or social housing (66 to 100 family lot per gross hectare). HDacIT (b) 7% of gross area for medium-density or economic housing (21 to 65 family lot per gross hectare). (c) 3.5% of gross area low-density or open market housing (20 family lots and below per gross hectare). These areas reserved for parks, playgrounds and recreational use shall be non-alienable public lands, and non-buildable. The plans of the subdivision project shall include tree planting on such parts of the subdivision as may be designated by the Authority. Upon their completion as certified to by the Authority, the roads, alleys, sidewalks and playgrounds shall be donated by the owner or developer to the city or municipality and it shall be mandatory for the local governments to accept provided, however, that the parks and playgrounds may be donated to the Homeowners Association of the project with the consent of the city or municipality concerned. No portion of the parks and playgrounds donated thereafter shall be converted to any other purpose or purposes." (Underscoring supplied) Based on the above-quoted citation, roads, alleys, sidewalks and playgrounds have to be donated by the owner/developer to the concerned city or municipality, and it is mandatory for the local government to accept the donation. Furthermore, parks and playgrounds may be donated by the owner/developer in favor of the Homeowners Association provided that such donation is made with the consent of the concerned city or municipality. It is noteworthy to mention that in the case of The City of Angeles vs. Court of Appeals, G.R. No. 97882, August 28, 1996 , the Supreme Court had the occasion to emphasize the mandatory tenor of Section 31 of PD 957, as amended by PD 1216, relative to the need to make the donation in favor of the city or municipality, in this wise: " It is clear from the aforequoted amendment that it is no longer optional on the part of the subdivision owner/developer to donate the open space for parks and playgrounds; rather there is now a legal obligation to donate the same . Although there is a proviso that the donation of the parks and playgrounds may be made to the homeowners association of the project with the consent of the city of municipality concerned, nonetheless, the owner/developer is still obligated under the law to donate. Such option does not change the mandatory character of the provision. The donation has to be made regardless of which donee is picked by the owner/developer. The consent requirement before the same can be donated to the homeowners' association emphasizes this point. " (Underscoring supplied) CDAHIT In the instant case, what were donated by PALICO to the Association are open spaces, road lots, canals, alleys, easements, parks, playgrounds, and other common areas. Such cannot be done since the above law is clear as to whom the open spaces and other common areas may be donated, which is, the city or municipal government concerned. Accordingly, the Association cannot in turn donate the same property to The Roman Catholic Bishop of Cubao under the principle "No one can give what he does not have" (Nemo dat quod non habet) . Based on the foregoing, your request for exemption from the payment of donor's tax cannot be granted for lack of legal basis. Please be guided accordingly. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue