BIR Ruling [DA-009-99]

January 7, 1999 BIR RULING [DA-009-99] National Housing Authority Quezon Memorial Elliptical Road Quezon City Attention: Ms . Virginia R . Domingo Department Manager, NCL Gentlemen : This refers to your letter dated July 14, 1998 requesting for a ruling that no gain or loss shall be recognized on the transfer/subdivision and awarding of parcels of land registered in the name of the Bayanihan Credit Union, Inc., a credit cooperative duly registered with the Cooperative Development Authority (CDA) to its members, who are underprivileged and homeless, under the provisions of R.A. 7279, and therefore, exempt from the creditable withholding tax imposed under Revenue Regulations No. 2-98. LLjur It is represented that the Bayanihan Credit Union, Inc. with Certificate of Registration No. RIII-P-008, serving as a facilitator for its members, acquired by virtue of a loan from the Home Development Mutual Fund (otherwise known as the Pag-IBIG Fund), parcels of land situated at Barangay Caingin, Bocaue, Bulacan, covered by Transfer Certificates of Title Nos. T-10594P(M) and T-18543P(M) in the name of the cooperative; that it has entered into an agreement with the National Housing Authority (NHA), for it to assist and facilitate its socialized housing undertaking; and that it has subdivided the said properties into homelots and distributed the homelots to its member-beneficiaries. In reply, please be informed that the transfer by the cooperative of the aforesaid parcels of land in favor of its individual member-beneficiaries is not subject to the creditable withholding tax imposed under Revenue Regulations No. 2-98, implementing Section 57(B) of the same Code, considering that the said transfer of properties is without any consideration since it is merely a formality to finally effect transfer of the said property to its member-beneficiaries who actually bought the same through the cooperative. In other words, the transfer is without any consideration because it is in fact transferring the ownership of the properties which actually belong to the member-beneficiaries. Furthermore, the said transfer is not subject to the donor's tax imposed under Section 99 of the Tax Code of 1997, since there is no donative intent or intention on the part of the cooperative to donate the said properties to its member-beneficiaries, considering that it could not donate properties the ownership of which belongs to the donees (member-beneficiaries) themselves. However, it is noted that under Section 196 of the Tax Code of 1997, the deeds or documents subject to the documentary stamp tax imposed therein are those where the realty sold shall be granted, assigned, transferred, or otherwise conveyed to a purchaser or purchasers or to any other person or persons designated by such purchaser or purchasers, thereby excluding from its purview the instant case considering that no consideration is involved in the transaction. Accordingly, the transfer by the cooperative of the said properties in favor of its members-beneficiaries is not subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. However, the notarial acknowledgment to said deed of conveyance is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the Tax Code of 1997. (BIR Ruling No. 398-93 dated October 11, 1993) 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. cdt Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)