ITAD BIR Ruling No. 276-15

September 15, 2015 ITAD BIR RULING NO. 276-15 Section 101 (A) (3) Tax Code; Revenue Regulations No. 25-03 The Apostolic Nunciature in the Philippines (Embassy of the Holy See) 2140 Taft Avenue, P.O. Box 3364, Manila Attention: Msgr. Chibuike Onyeaghala First Counsellor Gentlemen : This refers your Note Verbal No. 1846/15 dated 29 July 2015 indorsed by the Department of Foreign Affairs (DFA) and the Department of Finance (DOF) on the donation by your Embassy of a motor vehicle to the Roman Catholic Bishop of Sorsogon, Most Reverend Arturo M. Bastes, D.D., specifically described as follows: Make Model Color Chassis Number Engine Conduction Year Number Number Toyota Innova 2.5 2006 Off White KUN40-5007332 2KD9551643 A16488 M/T Dsl Documents show that the Apostolic Nunciature in the Philippines, represented by Archbishop Giuseppe Pinto, Apostolic Nuncio, as Donor , and Most Reverend Arturo M. Bastes D.D., the Roman Catholic Bishop of Sorsogon, a corporation sole established in the City of Sorsogon, with registered address at Old Bishop's House Compound, Magsaysay St., Sorsogon City, Philippines, as Donee , executed a Deed of Donation and Acceptance over a motor vehicle specifically described above; and that the Apostolic Nunciature now requests assistance to facilitate the transfer of registration of the subject vehicle under the Donee's name. cHECAS In reply, please be informed of the following: As to donor's tax , Section 98 of the National Internal Revenue Code of 1997, as amended (Tax Code), provides that transfers by gift of property, real or personal, are generally subject to tax. Section 98 states: "CHAPTER II Donor's Tax SEC. 98. Imposition of Tax. (A) there shall be levied, assessed, collected and paid upon the transfer by any person, resident or nonresident, of the property by gift, a tax, computed as provided in Section 99. (B) the tax shall apply whether the transfer is in trust or otherwise, whether the gift is direct or indirect, and whether the property is real or personal, tangible or intangible. . . ." However, transfers to religious corporation/institution are exempt from donor's tax as provided in Section 101 (A) (3) of the Tax Code. It states: " SEC. 101. Exemption of Certain Gifts. The following gifts or donations shall be exempt from the tax provided for in this Chapter: . . . (A) In the Case of Gifts Made by a Resident xxx xxx xxx (3) Gifts in favor of an educational and/or charitable, religious , cultural or social welfare corporation, institution, accredited nongovernment organization, trust or philanthropic organization or research institution or organization: Provided, however, That not more than thirty percent (30%) of said gifts shall be used by such donee for administration purposes. . . . " (Underscoring ours) In view of the foregoing, since the donation is made to or for the use of the Roman Catholic Bishop of Sorsogon, which is a religious corporation, the aforementioned donation of a 2006 Toyota Innova by the Apostolic Nunciature is exempt from the payment of donor's tax pursuant to Section 101 (A) (3) of the Tax Code, provided, however, that not more than 30% of the gifts shall be used by the donee for administration purposes. However, the said transfer of motor vehicle is subject to excise tax under Republic Act No. 9224, 1 as implemented by Revenue Regulations (RR) No. 25-03. Section 8 of the RR provides, viz : "CHAPTER II Coverage, Bases and Rates of Tax xxx xxx xxx SEC. 8. Tax Treatment on Subsequent Sale, Transfer or Exchange of Tax-Exempt Automobile by a Tax-Exempt Person/Entity to a Non-Exempt Person/Entity . In cases where a tax-exempt person/entity acquired an automobile, whether locally purchased or imported, without payment of the tax by reason of his/their exemption, the purchase thereof by a non-exempt person/entity shall be subjected to the ad valorem tax based on the higher of (i) actual consideration between the tax-exempt person/entity and the non-exempt person/entity; or (ii) the depreciated value of the automobile at the time of sale, transfer, or exchange which depreciated rate shall be ten percent (10%) per year, but in no case shall the total amount of depreciation be more than fifty percent (50%) of the original cost or value. However, in case where the automobile was acquired by the tax-exempt person or entity prior to but sold after the effectivity of the Act, the computation of the ad valorem tax shall be governed by the Act. Where a tax-exempt automobile subsequently sold, transferred or exchanged by a tax-exempt person or entity was determined to be originally acquired by such person or entity primarily for the purpose of avoiding the payment of the excise tax, the ad valorem tax shall be computed based on the original purchase price or value of importation of such motor vehicle at the time of its original purchase or importation by such tax-exempt person or entity without the benefit of any deduction for depreciation otherwise allowed under existing rules and regulations." Based on the foregoing, transfers made by tax-exempt person/entity of automobile to person/entity not enjoying indirect tax exemption shall be subject to excise tax in the hands of the latter and the said non-exempt transferee shall be liable for the unpaid excise tax on such automobile based on its depreciated value. In sum, this Office is of the opinion and so holds that the herein donation of a 2006 Toyota Innova by the Apostolic Nunciature to the Roman Catholic Bishop of Sorsogon is subject to excise tax. Being a non-exempt transferee of the subject motor vehicle, it shall be considered the purchaser thereof who shall then be liable for the unpaid excise tax pursuant to Sections 3 and 8 of RR No. 25-03. Finally, the Deed of Donation and Acceptance is subject to documentary stamp tax of P15.00 imposed under Section 188 of the same Code. This ruling is issued on the basis of the facts as represented. However, if upon investigation it shall be disclosed that the actual facts are different, then this ruling shall be without force and effect insofar as the herein parties are concerned. AHDacC Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue Footnotes 1. An Act Rationalizing the Excise Tax on Automobiles, amending the provisions of Section 149 of the National Internal Revenue Code of 1997, as amended.