BIR Ruling No. 554-12

September 3, 2012 BIR RULING NO. 554-12 Section 101 (A) (3), 1997 NIRC; BIR Ruling No. 254-2012 Sunny Realty Corporation Room 212, Regina Bldg. 410 Escolta St. Manila Attention: Benito Cu-Uy-Gam President Gentlemen : This refers to your letter dated July 11, 2012 requesting for exemption from the payment of donor's tax on the donation by Sunny Realty Corporation of three (3) parcels of land with improvements thereon to Philippine Cultural College, Inc. Documents submitted show that Sunny Realty Corporation (TIN 000-822-459-000) is the registered owner of the following parcels of land and improvements: a. Parcel of land with area of 506 sq.m. evidenced by TCT No. 12271 issued by the Register of Deeds for Quezon City; b. Parcel of land with area of 936 sq.m. evidenced by TCT No. N-255078 issued by the Register of Deeds for Quezon City; c. Parcel of land with area of 990 sq.m. evidenced by TCT No. 13317 issued by the Register of Deeds for Quezon City; and d. Building/Improvement with floor area of 526.42 sq.m. Evidenced by Tax Declaration No. D-055-03379 issued by the Office of the City Assessor or Quezon City. A Deed of Conditional Donation and an amendment thereto, were executed on March 5, 2012 and March 14, 2012, respectively whereby Sunny Realty Corporation donated the afore-mentioned properties in favor of Philippine Cultural College, Inc. (TIN 027-000-323-452), a non-stock non-profit educational institution registered with the Securities and Exchange Commission (SEC) under SEC Company Registration No. 5423 and recognized by the Department of Education under Government Recognition No. 56 Series of 1973. 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 Sec. 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. 254-2012 dated April 20, 2012) CHDAaS Inasmuch as Philippine Cultural College, Inc. is an educational corporation, any donation to it is exempt from the payment of donor's tax pursuant to the above provision 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. In case of donation of real property, the Register of Deeds shall annotate this condition at the back of the title because failure to comply with the said condition shall result in subjecting the donation to donors tax. Sec. 185 of Regulations No. 26, otherwise known as the Revised Documentary Stamp Tax Regulations, implementing Title VII of the Tax Code, provides that a conveyance of realty not in connection with a sale, to trustees or other persons without consideration is not taxable. Hence, the above-stated deed is likewise not subject to the documentary stamp tax prescribed under Sec. 196 of the 1997 Tax Code, as amended, but only to the documentary stamp tax of P15.00 imposed under Sec. 188 of the same Code. It is to be noted that if the same properties acquired by gift are 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 Philippine Cultural College, Inc. donates the same properties donated to it to a non-exempt donee, 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