BIR Ruling [DA-014-99]

January 11, 1999 BIR RULING [DA-014-99] Centennial Bank 15/F Prestige Tower Emerald Avenue, Ortigas Center Pasig City Attention: Atty . Samuel B . Padilla Corporate Secretary Gentlemen : This refers to your letter dated August 28, 1998 requesting for a ruling that the transfer of condominium units which were held in trust for Centennial Savings Bank, Inc. (CSBI) by AFP Retirement and Separation Benefits System (AFPRSBS), Armed Forces and Police Savings and Loan Association, Inc. (AFPSLAI) and AFP Mutual Benefit Association, Inc. (AFPMBAI), in favor of the former is not subject to capital gains tax and to documentary stamp tax. It is represented that CSBI is a thrift bank organized under Republic Act 7906, whose Articles of Incorporation and By-laws were duly approved by the Securities and Exchange Commission (SEC) and the Certificate of Authority to Operate was issued by the Bangko Sentral ng Pilipinas (BSP); that you commenced operations on February 18, 1998; that prior to your acquisition of corporate personality, you bought condominium units to be used as your bank site at Prestige Tower situated at Emerald Avenue, Ortigas Center, Pasig City out of the paid subscriptions of AFPRSBS, AFPSLAI and AFPMBAI who are the major stockholders of CSBI with 40:40:20 sharing equity, to wit: No. of Shares Amount Amount Paid Subscribed Subscribed on Subscription AFPRSBS 1,999,964 P199,996,400 P199,996,400 AFPSLAI 1,999,964 P199,996,400 P199,996,400 AFPMBAI 999,982 P99,998,200 P99,998,200 that considering CSBI has no legal personality at the time the property was purchased, it was agreed that the title be registered in the name of AFPRSBS, AFPSLAI and AFPMBAI collectively as trustees of the former until such time that it can secure its Certificate of Incorporation with the SEC and License to Operate with the BSP; that on October 28, 1997, Spouses Tiong Chua Rosario and Nony Lim-Uy Rosario for a consideration of P79,645,950.00 executed five (5) Deeds of Absolute Sale covering said condominium units of the Prestige Tower Condominium, in favor of AFPRSBS, AFPSLAI and AFPMBAI, to wit: Unit No. Parking/Floor Area Location CCT No. 104 252.48 Ground Floor PT-19228 204 274.99 Second Floor PT-19229 Parking Space Percentage Share 37 & 38 25.00 2/B PT-31617 39 & 42 25.00 2/B PT-21618 57 12.50 2/B PT-21591 that the corresponding capital gains and documentary stamp taxes were paid on the said transfer; that on December 15, 1997, CCT's covering said condominium units were cancelled and new ones were issued by the Register of Deeds of Pasig City in the name of said trustees; and that upon issuance of CSBI's Certificate of Incorporation on February 10, 1998, AFPRSBS, AFPSLAI and AFPMBAI collectively decided to transfer the said condominium units which they held in trust for CSBI, the real owner. Hence, this request. In reply, please be informed that since the transfer of the subject properties is without consideration pursuant to a Deed of Conveyance dated August 27, 1998, the transfer of the said properties in favor of Centennial Savings Bank, Inc. is not subject to the six percent (6%) capital gains tax imposed under Section 24(D) of the Tax Code of 1997. Moreover, the alleged transfer of the above-mentioned properties is exempt from the donor's tax imposed under Section 98 of the same Tax Code due to lack of donative intent on the part of AFPRSBS, AFPSLAI AND AFPMBAI. Furthermore, the Deed of Conveyance is not subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. However, the notarial acknowledgment to the said deed is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the Tax Code of 1997. (BIR Ruling No. 021-98 dated February 19, 1998.) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it shall be disclosed that the facts are different, then this ruling shall be considered null and void. aisadc Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal & Enforcement Group