BIR Ruling No. 656-12

December 21, 2012 BIR RULING NO. 656-12 Section 101 (B) (1) of the Tax Code of 1997, as amended Hon. Antonino A. Aurelio, D.Sc. Office of the Municipal Mayor Municipality of Rizal Province of Laguna Gentlemen : This refers to your letter dated October 25, 2012, requesting for exemption from the payment of donor's tax under Section 101 (A) (2) of the Tax Code of 1997, as amended. CacTSI Documents submitted disclosed that the Panlalawigang Pagamutan ng Laguna , with Taxpayer Identification No. 003-056-256-001, is a government hospital under the Provincial Local Government of Laguna established and existing under the laws of the Republic of the Philippines; that it is a member of Inter Local Health Zone-San Pablo, Alaminos, Rizal, Calauan Cluster (SPARCH-ILHZ), of which the main objective is to strengthen the collaborative linkages between the LGUs, the DOH, NGOs, Pos, private sector and other national and local government agencies through the generation, mobilization and allocation of essential resources for sustainable public health and hospital services for the attainment of quality health care; that on October 17, 2002, a Deed of Donation was entered into by The Rural Health Care Foundation , a foundation duly organized to provide support and giving assistance for rural health program with postal address at 48 West 1500 North, Nephi City, Utah, USA, in favor of Panlalawigang Pagamutan ng Laguna as donee for the following medical equipments: Quantity Items 6 Telemetry Monitor with stands 4 Telemetry Monitors 2 Computer Monitors 4 Central Stations/IRVS 9 Antenna Sets more particularly described as follows: Box Number Description of Contents Weight 1 5-Passport2 & DT-7000 Transceiver 108 lbs 9-Antenna-Telemetry Access Point 1-Ethernet Hub 8C 1-Patientnet Instrument Transceiver 2 5-Passport2 & DT-7000 Transceiver 106 lbs 18-Ceiling Mount Antenna 6-DT4500 Ambulatory Transceiver 3 2-CPU (1 Central Station, 1 IRVS) 53 lbs 4 2-CPU (1 Central Station, 1 IRVS) 54 lbs 5 4-Monitor power supply, Mouse, 21 lbs Power cords, 2-Keyboards, 2-set of computer cables 6 2-Computer Monitor 48 lbs 7 6-Wheels bases for stands 64 lbs 3-Owners Manuals 8 6-Poles with mounts, handles and 48 lbs baskets 9 Misc. cables and leads 3 lbs and that the Donee is in need of various equipment as herein above described to attain its objective. Other documents submitted in support of your request are the following: 1. BIR Certificate of Registration (2303) of Panlalawigang Pagamutan ng Laguna; 2. Deed of Donation between the Rural Health Care Foundation and Panlalawigang Pagamutan ng Laguna; 3. Copy of Resolusyon Blg. 02-021-2012 of Tanggapan ng Kalihim sa Sangguniang Bayan; ASEcHI 4. Certified Machine Copy of SPARC (LAGUNA) Inter-Local Health Zone, Inc.'s SEC Certificate of Incorporation, Articles of Incorporation and By-Laws; 5. Copy of Executive Order No. 205, dated January 31, 2000, entitled "Providing for the Creation of a National Health Planning Committee (NHPC) and the Establishment of Inter-Local Health Zones (ILHZS) throughout the Country, and for other purposes"; 6. Shipper's Letter of Instruction; and 7. Certificate of Non-Forum Shopping. In reply, please be informed that pursuant to Section 101 (B) (1) of the Tax Code of 1997, gifts made by a non-resident individual or organization 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 said Government shall be exempt from donor's tax. Considering that the above donation was made by a non-resident organization, the Rural Health Care Foundation of Utah in favor of Panlalawigang Pagamutan ng Laguna, a provincial government hospital, the aforementioned donation is exempt from the payment of donor's tax pursuant to Section 101 (B) (1) of the Tax Code of 1997. However, Section 109 of the same Code which enumerates the transactions exempt from VAT does not include importation of articles/goods consigned to any political subdivisions of the Government. Accordingly, since the donated medical equipment will come from abroad, the importation thereof shall be subject to the 12% VAT based on the total value used by the Bureau of Customs in determining tariff and customs duties, excise taxes, if any, and other charges, such tax to be paid by the importer prior to the release of the medical equipment from customs custody pursuant to Section 107 (A) of the Tax Code of 1997. Moreover, the deed of donation is likewise not subject to the documentary stamp tax prescribed under Section 196 of the Tax Code of 1997, but only to the documentary stamp tax of P15.00 imposed under Section 188 of the same Tax Code. ( BIR Ruling No. 225-2011 dated July 13, 2011 ) 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. TAHcCI Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue