BIR Ruling [DA-077-97]

February 24, 1997 BIR RULING [DA-077-97] Mr. Wolfgang J. Villanueva No. 8, 16 Street Bacolod City 6100 S i r : This refers to your letter dated January 27, 1997 requesting for a ruling relative to the computation of the amount of documentary stamp tax payable on the Deed of Conveyance dated November 13, 1996, executed by you and your wife Hester L. Villanueva in favor of Wolfvilla, Inc., transferring your certain parcels of land with improvements thereon situated in Bacolod City and condominium units in Metro Manila, in exchange for Sixteen Thousand Five Hundred (16,500) shares of the capital stock of the corporation valued at One Million Six Hundred Fifty Thousand Pesos (P1,650,000.00) at a par value of One Hundred Pesos (P100.00) per share to be distributed equally between you and your wife. It represented that the Revenue District Office in Bacolod assessed you to pay the documentary stamp tax based either on the (a) consideration as shown in the document or (b) the fair market value of the real properties, or (c) zonal value, whichever is higher in conformity with Revenue Memorandum No. 44-86; and that you are of the opinion that the value of the stocks issued in exchange for the real properties shall be the basis of the documentary stamp tax to be paid. In reply, please be informed that your opinion is hereby confirmed. A conveyance or deed whereby land is assigned or transferred to the purchaser is subject to documentary stamp tax based on the consideration or value received or contracted to be paid for such realty. (Sec. 196, Tax Code, as amended) A stock in corporation is a valuable consideration for transfer of real property (Section 177, Documentary Stamp Tax Regulations). Accordingly, if real properties are exchanged with stocks in a corporation, as in this case, the latter (shares of stock) is the consideration, the value of which shall be the basis of the documentary stamp tax due on the aforesaid Deed of Conveyance. (BIR Ruling No. 259-88) Accordingly, the zonal values of the real properties cannot be considered as the basis in computing the documentary stamp tax. Since the certificate of shares of stock consisting the consideration are original issues, the documentary stamp tax due hereon shall be based on the par value of such certificates, i.e., P2.00 on each P200.00 or fractional part thereof (Sec. 175, Tax Code, as amended by R.A. 7660). BIR Ruling No. 412-88 dated August 25, 1988) cdta Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service) By: ALICIA L. TOMACRUZ Head Revenue Executive Assistant (Legal Service)