BIR Ruling [DA-034-00]

January 17, 2000 BIR RULING [DA-034-00] Nagkakaisang Samahang Magkakapitbahay Homeowners Association, Inc . Barangay 171, Bagumbong Caloocan City Attention: Mr . Jose J . Olarte President Gentlemen : This refers to your letter dated December 15, 1999 requesting for a ruling that no gain or loss is recognized on the transfer/subdivision and awarding of the parcel of land registered in the name of the Nagkakaisang Samahang Magkakapitbahay Homeowners Association, Inc., which acted merely as facilitator under the Community Mortgage Program (CMP) of the government, to the concerned member-beneficiaries. the actual property-owners, who are underprivileged and homeless, under the provisions of R.A. 7279, and therefore, exempt from the corporate income tax, and from the creditable withholding tax imposed under Revenue Regulations No. 2-98. It is represented that the Nagkakaisang Samahang Magkakapitbahay Homeowners Association, Inc. is a non-stock. non-profit domestic corporation duly registered with the Home Insurance and Guaranty Corporation (HIGC); that the parcel of land covered by TCT No. C-316566 of the Registry of Deeds for Caloocan City is situated at Barangay 171, Bagumbong, Caloocan City; and that the Association has subdivided the said property into homelots to be distributed to its member-beneficiaries. llcd In reply, please be informed that the transfer in favor of the individual member-beneficiaries of the said subdivided property 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 Nagkakaisang Samahang Magkakapitbahay Homeowners Association, Inc. In other words, the transfer is without any consideration because the Association is in fact transferring the ownership of the property which actually belong to the member-beneficiaries. Furthermore, the said transfer is not subject to the donor's tax imposed under Section 93 of the Tax Code 1997, since there is no donative intent or intention on the part of the Association to donate the said property to said member-beneficiaries, considering that it could not donate property the ownership of which belong 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 said transaction upon which the tax is imposed could be based. Accordingly, the transfer of titles of the said properties in favor of your member-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. CMP 171-98, dated September 16, 1998, citing BIR Ruling No. 398-93 dated October 11, 1993) cdll 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.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group