BIR Ruling No. 470-13

December 16, 2013 BIR RULING NO. 470-13 Section 101 (A) (3), NIRC of 1997; BIR Ruling No. 429-11; BIR Ruling No. 118-12; BIR Ruling No. 298-12 Next Generation Builder Realty Corporation No. 5 Bell St., Filinvest East Homes, Brgy. Mayamot, Antipolo City Attention: Rowena A. Bais Corporate Secretary Gentlemen : This refers to your letter dated January 9, 2012 requesting exemption from donor's tax on the donation of real property by NEXT GENERATION BUILDER REALTY CORPORATION in favor of the DAE SHIN PRESBYTERIAN CHURCHES IN THE PHILIPPINES. Documents submitted disclosed that NEXT GENERATION BUILDER REALTY CORPORATION ("Next Generation") , with TIN 007-421-950-000, is a domestic corporation duly registered with the Securities and Exchange Commission (SEC) under Company Registration No. CS200915989 and is engaged in real estate business; that the DAE SHIN PRESBYTERIAN CHURCHES IN THE PHILIPPINES ("Dae Shin") , with TIN 004-514-979-000, is a religious corporation duly registered with the SEC under Company Registration No. ANO95-035-66; that Next Generation is the registered owner of a Five Hundred Ten square meter (510 sq.m.) parcel of land (Lot 3, Blk. 3 of the cons-subd. plan, Pcs-00-009393) located in Centro de Buenviaje, Sto. Nio, Marikina City and covered by Transfer Certificate of Title (TCT) No. 508905 of the Registry of Deeds for Marikina City; and that on January 3, 2012, a Deed of Donation covering the subject property was executed by Next Generation (represented by Rowena A. Bais) in favor of the Dae Shin (represented by Rev. Kim Yong Hoon) who accepted the said donation. In support of the request, the following documents are submitted: l. Certified true copies of the SEC Articles of Incorporation and By-Laws of Next Generation ; 2. Certified true copies of the SEC Amended Articles of Incorporation and By-Laws of Dae Shin ; IEHSDA 3. SPA of Corporate Secretary; 4. Next Generation Minutes/Board Resolution on the donation; 5. Original Deed of Donation; 6. Certified true copy (CCV) of TCT No. 508905; 7. Verification and Certification against Forum Shopping; 8. Certified true copy of the previous tax declaration of the subject property; and 9. Copies of the BIR Certificate of Registration of the parties. 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 Dae Shin is a duly registered religious corporation, 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 (real property covered by TCT No. 508905), 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) If the donor is a value-added tax (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 No. 16-2005 the same being considered a transaction deemed sale. If the donor is not a VAT registered person, the donation is exempt from VAT. (BIR Ruling No. 298-12 dated May 3, 2012) 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) cDaEAS It is to be noted that if the same property acquired by donation (TCT No. 508905) 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 Dae Shin 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