BIR Ruling [DA-065-04]

February 12, 2004 BIR RULING [DA-065-04] Ms. Mary Marilyn Santos Garcia Heights, Barangay Holy Spirit Quezon City M a d a m : This refers to your letter dated January 15, 2004 requesting for a ruling that the transfer/subdivision of a parcel of land registered in the name of Samahan ng Pagkakaisa ng Garcia Heights Homeowners Association, Inc. covered by TCT No. N-141353 issued by the Registry of Deeds for Quezon City in your favor under the provisions of R.A. No. 7279, is exempt from capital gains tax and/or creditable withholding tax imposed under Revenue Regulations No. 2-98. It is represented that Samahan ng Pagkakaisa ng Garcia Heights Homeowners Association, Inc. is a non-stock, non-profit community organization duly registered with the Securities and Exchange Commission (SEC); that it was organized to promote low-cost housing project that shall benefit the homeless and underprivileged residents of Quezon City; that Samahan ng Pagkakaisa ng Garcia Heights Homeowners Association, Inc. served as facilitator, and through the Community Mortgage Program (CMP) of the National Home Mortgage Finance Corporation (NHMFC), it acquired by virtue of a loan from the NHMFC, the above-mentioned parcel of land at Quezon City; and that it has subdivided the said property into homelots and distributed the homelots to its member beneficiaries. In reply, please be informed that the transfer in favor of your individual member-beneficiaries of the said subdivided property is not subject to either the capital gains tax imposed under Section 24(D)(1), or the creditable withholding tax imposed under Revenue Regulations No. 2-98, as amended, implementing Section 57(A) of the same Code, considering that the said transfer of your property is without any consideration since it is merely a formality to finally effect transfer of the said property to your member-beneficiaries who actually bought the same from the former owner through your Association. In other words, the transfer is without any consideration because you are 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 99 of the Tax Code of 1997, since there is no intention on the part of the association to donate the said property to said members, considering that the Association could not donate property the ownership of which belong to themselves (members-beneficiaries). 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 imposed could be based. Accordingly, the transfer of title of the said property in your favor, as member-beneficiary 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. CAcIES Very truly yours, (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service