BIR Ruling [DA-032-01]

March 12, 2001 BIR RULING [DA-032-01] R.A. 7279 171-98 Abra Farmers & Provincial Employees Multi-Purpose Cooperative Bangued, Abra Attention: Mr . Anacleto B . Buenafe President Gentlemen : This refers to your letter dated September 19, 2000 requesting for exemption from the payment of capital gains tax on subdivision/individualization and distribution of the parcel of land registered in the name of Abra Farmers & Provincial Employees Multi-Purpose Cooperative which acted merely as facilitator under the Group Land Acquisition and Development (GLAD) program of the government to the concerned member-beneficiaries, the actual property-owners, who are underprivileged and homeless, under the provisions of RA. 7279. It is represented that Abra Farmers & Provincial Employees Multi-Purpose Cooperative (AFPEMCO) is a cooperative duly registered with the Cooperative Development Authority (CDA); that the parcel of land registered in the name of AFPEMCO is covered by TCT No. T-1259 of the Registry of Deeds for the Province of Abra and situated at Goloca, Calaba, Bangued, Abra; and that the Association has subdivided the said property into homelots with the respective titles to be distributed to its member-beneficiaries. In reply, please be informed that the transfer in favor of the individual member-beneficiaries of the said subdivided properties is not subject to either the capital gains tax imposed under Section 24(D)(1) of the Tax Code of 1997, or the creditable withholding tax imposed under Revenue Regulations No. 2-98, implementing Section 57(B) of the same Code, considering that the transfer of said property is without any consideration since it is merely a formality to finally effect transfer of the said property to the member-beneficiaries who actually bought the same from the former owner through the Abra Farmers & Provincial Employees Multi-Purpose Cooperative. In other words, the transfer is without any consideration because the Cooperative 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 98 of the Tax Code of 1997, since there is no intention on the part of the association to donate said property to the members considering that the members of the association could not donate properties the ownership of which belongs to the transferees (member-beneficiaries) themselves. Moreover, 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 purchasers 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 said transaction upon which the tax imposed could be based. 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. CMP 171-98, dated September 16, 1998, citing BIR Ruling No. 398-93 dated October 11, 1993) DTcHaA 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. Very truly yours, Commissioner of Internal Revenue By: (SGD.) MILAGROS V. REGALADO Acting Assistant Commissioner Legal Service