BIR Ruling [DA-055-05]

February 16, 2005 BIR RULING [DA-055-05] 24 (D) (1); 188; 196; DA 301-2003; 115-94 J.T. Abangan & Co . M-07 Mezzanine Floor Cebu Long Se Building Osmea Blvd. corner Jasmin Street Cebu City Attention: Atty. Marie Joy T. Abangan Managing Partner Gentlemen : This refers to your letter dated January 26, 2005 requesting for confirmation of your opinion that the transfer of real property from the trustee to the trustor who is the beneficial owner of the property is not subject to capital gains and documentary stamp taxes. It is represented that H. SERAFICA & SONS CORP. (HSSC), a family corporation, bought a parcel of land located at Cacao, Kananga, Leyte and covered by Transfer Certificate of Title No. T-2983 with an area of approximately 18.7543 hectares. The transfer of the said property was titled in the name of Francisco S. Serafica, Sr. since he was the person who was tasked to negotiate the sale and in order to afford the corporation a better edge in bargaining for the price of the land. It is further represented that from the time said property was purchased up to the present, HSSC, being the real and actual owner thereof, possessed and enjoyed the use and have accumulated the fruits of the same. Moreover, it was HSSC that has been paying the real property taxes. DEIHAa On June 20, 2003, Sps. Francisco and Blanquita Serafica executed a Deed of Confirmation and Quitclaim without consideration in favor of HSSC in order to transfer the title of the said property to HSSC, the real owner. The transfer of title is now being held in abeyance pending the issuance of the clearance from the Bureau of Internal Revenue. Hence, this request. In reply, please be informed that pursuant to Section 27(D)(5) of the Tax Code of 1997, the conveyance of the property by the Trustee in favor of the Trustor is not subject to the final capital gains tax of 6%. Moreover, the same is also not subject to the creditable withholding tax prescribed by Revenue Regulations No. 2-98, implementing Section 57(B). ( BIR Ruling No. DA 301-2003 dated September 15, 2003 ) Furthermore, the deed of conveyance is not subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997, because there is no monetary consideration in the subject transfer, However, the notarial acknowledgment to the 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. 115-94 dated July 1, 1994 ) Since the transfer of real property by virtue of the Deed of Confirmation and Quitclaim merely constitutes as a confirmation of title in favor of the beneficial owner, H. SERAFICA & SONS CORP., it is not subject to the capital gains and documentary stamp taxes imposed under Sections 24(D)(1) and 196 of the Tax Code of 1997, respectively nor to the creditable withholding tax prescribed by Revenue Regulations No. 2-98, implementing Section 57(B) of the Tax Code of 1997. However, the notarial acknowledgement to the said Deed of Confirmation and Quitclaim is subject to the documentary stamp tax of P15.00 only pursuant to Section 188 of the Tax Code of 1997. 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. SEHTIc Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group