BIR Ruling [DA-078-97]

February 26, 1997 BIR RULING [DA-078-97] Scorpio, Inc. 4th Floor, SGV I Building 6760 Ayala Avenue Makati City Attention: Mr . Geronimo M . Pedro Corporate Secretary Gentlemen : This refers to your letter dated January 16, 1997 requesting in effect for a ruling relative to the computation of the amount of documentary stamp tax payable on the Deed of Assignment executed by the Spouses Roberto G. Villanueva, Jr. and Lucille R. Villanueva in favor of Scorpio, Inc., transferring real properties, in exchange for shares of stock to be distributed to the spouses, which is the subject of BIR Ruling No. 534-470-96 dated October 24, 1996. llcd It is represented that Revenue District Office No. 50 - South Makati assessed you to pay the documentary stamp tax based on the zonal value of the real properties exchanged. In reply, please be informed 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. 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 a 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 Assignment. (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 thereon shall be based on the par value of such certificates, i.e., P2.00 on each P200.00 or fractional part thereof (Sec. 196, Tax Code, as amended by R.A. 7660). (BIR Ruling No. 412-88 dated August 25, 1988) Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service ) By: (SGD.) ALICIA L. TOMACRUZ Head Revenue Executive Assistant (Legal Service)