July 1, 2008

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BIR RULING [DA-(DT-001) 001-08]
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Section
101 (A)
" (3); BIR
Ruling
No. DA-
028-98

Salvador & Associates

815-816, Tower One & Exchange Plaza
Ayala Triangle, Ayala Avenue
Makati City

Attention: Atty. Serafin U. Salvador, Jr.

Atty. Rabiev Tobias M. Racho
Atty. Marie Cherylle Z. Hular

Gentlemen :

This refers to your letter dated May 22, 2008

requesting on behalf of your client, The Henry Sy
Foundation, Inc. (the "Foundation" for brevity) for
confirmation of your opinion that donations made
to the Foundation are exempt from donor's tax
prescribed under Section 101 (A) (3) and
documentary stamp tax (DST) under Section 175,
both of the National Internal Revenue Code
(NIRC), as amended. DCcHIS

As represented, the Foundation, which is in

the process of incorporation and registration with
the Securities and Exchange Commission (SEC)
will be a non-stock and non-profit charitable
corporation. The primary purposes for which the
Foundation is being organized are as follows:
"1. To promote the general
well-being of the human individual,
developing his potential to the fullest and
instilling desirable values;
2. For educational purposes,
including, without limiting the generality
of the foregoing, to foster an education
which would equip the individual for a
productive life, by providing assistance,
scholarships endowments, or otherwise
establishing facilities for the study,
education, training, and instruction of the
individual through formal, informal, or
non-formal education and to build the
character of the individual to become
useful members of society;
3. Without limiting the
generality of the foregoing, to provide
assistance education training and
resources to teachers and school staff
and education specialists within the
Philippines;
4. For scientific research and
the advancement of scientific
knowledge, including without limiting the
generality of the foregoing, to provide
endowment or scholarship grants and
any form of assistance for applied
scientific research in any frontier of
knowledge which the Board of Trustees,
or any committee validly constituted and
with sufficient authority, may deem
useful, beneficial, and adequate;
5. For medical research and
the advancement of medical knowledge,
including without limiting the generality
of the foregoing, to support studies and
research in various fields of medicine,
particularly those geared towards
improving health in urban and rural
communities in the Philippines;
6. To promote health, safety
and sanitation programs and fund
projects in selected urban and rural
communities aimed at controlling,
preventing and treating communicable
and degenerative diseases and other
 health disabilities including research into
diseases and disease control and health
issues; aCSEcA

7. To accept and receive

contributions, donations and/or
endowments from the government or
from the general public, by deeds,
grants, devises, bequests, or gifts, and
to make use of this in operating
enterprises, activities, or businesses as
may be necessary to carry out the
objectives of the Foundation;"
After its registration with the SEC, the Foundation
intends to obtain accreditation as a donee-
institution pursuant to Executive Order No. 671
dated October 22, 2007. In order to implement its
programs, the Foundation shall require funding.
Such funding shall necessarily come from gifts,
donations and other contributions, given that the
Foundation does not intend to engage in activities
for profit. In this regard, cash and shares of stock
in a domestic corporation will be contributed to the
Foundation, initially as part of the initial contribution
to the capital of the Foundation. After
incorporation, the Foundation will likewise likely
receive various donations from prospective donors
either in cash or property.
You now request for confirmation of your
opinion that:
1. Various gifts, donations and other
contributions made by residents
and/or nonresidents to the Foundation
in the form of cash and/or shares of
stock or other property, are exempt
from donor's tax; and
2. The Deed of Donation or Contribution
of Capital wherein shares of stock in a
domestic corporation are donated to
the Foundation is not subject to DST
under Section 175 of the NIRC, as
amended. However, the
acknowledgment on the deed is
subject to DST of P15.00 imposed
under Section 188 of the same Code.
 In reply, please be informed as follows:
Donations made to the Foundation are exempt
from donor's tax.
In BIR Ruling No. DA-058-04 dated
February 9, 2008, the prospective donors were
willing to donate real properties to the donee-
foundations for the purpose of putting up a retreat
house and seminary pending the issuance of the
Certificate of Tax Exemption and Accreditation with
the Philippine Council for NGO Certification
(PCNC). This Office ruled that —
". . . pursuant to Section 101(A)
(3) of the Tax Code of 1997, the
proposed donations to Merkaba
Foundation, Inc. and Redemptoris Mater
Missionary Seminary, Archdiocese of
Manila, Inc. are exempt from the
payment of donor's tax, subject to the
condition that not more than 30% of the
said gift shall be used by the donee for
administration purposes. TSCIEa

However, it is the opinion of this

Office that Merkaba Foundation, Inc. and
Redemptoris Mater Missionary
Seminary, Archdiocese of Manila, Inc.
are required to first secure accreditation
as donee institutions, from the Philippine
Council for NGO Certification (PCNC),
6th Floor SCC Bldg., CFA-MA
Compound, 4427 Interior Old Sta. Mesa,
Manila, in order that donations made to
them by natural and juridical persons
may be treated as fully deductible for
income tax purposes."
In another case, which is on all squares with
the present case, this Office opined as follows:
"Inasmuch as the donee is a
charitable institution, donation from its
benefactors is exempt from the payment
of donor's tax pursuant to Section
101(A)(3) of the Tax Code of 1997,
 subject to the condition that not more
than thirty percent (30%) of said gift shall
be used for administration purposes.
Moreover, the Deed of Donation
is not subject to documentary stamp tax.
However, the acknowledgment on said
deed is subject to the documentary
stamp tax of P15.00 imposed under
Section 188 of the Tax Code of 1997, as
amended." (BIR Ruling No. DA-120-08
dated March 4, 2008). AEcTCD

Inasmuch as the donee is a charitable

institution, donations in cash and/or shares of stock
or other properties in a domestic corporation to the
Foundation, both as part of the process of
incorporation and thereafter, on an ongoing basis,
are exempt from payment of donor's tax pursuant
to Section 101 (A) (3) and (B) (2) of the NIRC, as
amended, subject to the condition that not more
than 30% of the gift shall be used by the donee for
administration purposes. (BIR Ruling No. DA-467-
07 dated August 24, 2007).
Moreover, in the case of donations of real
properties, Section 185 of Regulations No. 26,
otherwise known as the Revised Documentary
Stamp Tax Regulations, implementing Title VII of
the NIRC, as amended, 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 of real
property is not subject to the DST prescribed under
Section 196 of the NIRC, as amended, but only to
the DST of P15.00 imposed under Section 188 of
the same Code. (BIR Ruling No. DA-28-98 dated
January 29, 1998 and BIR Ruling No. DA-123-
2001 dated July 18, 2001).
Donations of shares of stock to the Foundation is
not subject to DST under Section 175.
The issue on whether or not the donation of
shares of stock is subject to DST under Section
175 of the NIRC, as amended, has been answered
by this Office in BIR Ruling No. DA-492-07 dated
September 14, 2007. In the aforecited ruling, this
Office held that the transfer of shares is not subject
to DST since the monetary consideration in the
conveyance from which the tax shall be based is
wanting.
On the other hand, this Office opined in BIR
Ruling No. DA-311-05 dated July 6, 2005 that in
order that the DST may be imposed on the transfer
of shares or certificates of stock, there must be a
consideration and an actual or constructive transfer
of beneficial ownership of the shares from one
person to another. Although there may be a
transfer of beneficial ownership, if, however, the
transfer is without consideration, it is not within the
contemplation of Section 175 (then Section 176) of
the same Code. Thus, the transfer of shares by
virtue of a Deed of Donation is not subject to DST
prescribed in Section 175 of the NIRC as
amended, viz.: HITEaS

". . . this Office holds that the

transfer of the 10,000 shares of stock, in
Seaboard Eastern Insurance, from Lily
M. Co to Jacqueline Halili M. Co by
virtue of a Deed of Donation is not
subject to the documentary stamp tax
prescribed in Section 176 of the Tax
Code of 1997, as amended by R.A. No.
9243, as implemented by Revenue
Regulations No. 13-2004."
However, donations in shares of stock in a
domestic corporation, are subject to the DST of
P15.00 imposed under Section 188 of the NIRC,
as amended. (BIR Ruling No. DA-001-05 dated
January 5, 2005).
Subsequent transfer by the Foundation of donated
property is taxable.
If the same property acquired by gift 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 NIRC, as amended, and consequently
to the creditable expanded withholding tax under
Revenue Regulations (RR) No. 2.57.2 of RR No. 2-
98, as amended. If it is donated to a nonexempt
donee, the donor shall be liable for donor's tax
pursuant to Section 98 of the same Code.
Donations to the Foundation are deductible from
donor's taxable business income.
Donations to the accredited Foundation shall
be deductible in full from the taxable business
income of the donor depending on the donee's
compliance with the level of administrative
expense and utilization requirements. Otherwise, it
shall be entitled only to the limited deductions as
provided for under Section 34 (H) (1) of the Tax
Code (BIR Ruling No. S-30-054-98 dated
September 30, 1998).
Finally, in case of donations from non-
resident citizens, they are required to submit to this
Office the notarized Deed of Donation duly
authenticated by the Philippine Consul General of
the donor's residence. (BIR Ruling No. DA-120-
2008 dated March 4, 2008).
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.AaIDCS

Very truly
yours,

(SGD.)
JAMES H.
ROLDAN
Assistant
Commissioner
Legal Service