Lopez and Co.

February 13, 2008 BIR RULING [DA-085-08] 24 (D) (1); DA-078-2001; DA-125-97 Lopez and Co. LAC Center 2518 Leiva Street, Sta. Ana 1009 Philippines Attention: Mr. Restituto T. Lopez Senior Partner Gentlemen : This refers to your letter dated November 6, 2007 requesting for a ruling on the tax consequence of the registration and transfer to your client, JL Dumatol Realty and Development Corp. (Trustor), of the Pryce Center condominium units listed below together with the improvements thereon as a consequence of a Trust Agreement: CCT NO. UNIT NO. AREA IN SQ. METER 66360 601 110.095 inclusive of one (1) parking lot 66361 602 73.310 -do- 66362 603 107.940 -do- 66363 604 123.860 -do- 66364 605 89.260 -do- 66365 606 92.13 -do- 66366 607 121.45 -do- It is represented that JRN Management Services, Inc. (JRN, Trustee) with registered office address at 122 Valero Street, Salcedo Village, Makati City was registered with the Securities and Exchange Commission on September 6, 1983 to act as managers or managing agents of persons, firms, associations, corporations, partnerships and other entities: to provide management, investment and technical advice for commercial, industrial, manufacturing, and other kinds of enterprises; and to undertake, carry on, assist or participate in the promotion, organization, management, liquidation or organization of corporations, partnerships and other entities, except the management of funds, securities, portfolio or similar assets of the managed entities or corporations; that Manpower Resources of Asia (MRA, Trustee) with registered office address located at 2598 Manchas St., Brgy. Sta. Cruz, Makati City was duly created and organized under Philippine laws on June 22, 1979 to provide or furnish all forms of services relating to placement of land-based workers and to engage in contracting, enlisting and recruiting workers for local or foreign postings; that J. L. Dumatol Realty and Development Corp. (JLD, Trustor), was incorporated on February 23, 1989 under Philippines laws to acquire and own, hold, use, sell, assign, transfer, mortgage, pledge, exchange or otherwise dispose of real property of every kind of whatever lawful purpose or purposes; that JRN as Trustee, purchased the land on October 14, 1983 for P466,000, covered by TCT No. 127714, details are as follows: "TCT NO. 127714 A parcel of land (Lot 49, Blk. No. 30 of the subdn. Plan Psd.-29169, being a portion of Blk. 30, described on plan Psd.-26099, GLRO Rec. No. 2029), situated in the Mun. of Makati, Prov. of Rizal. Bounded on the N., by Calle Bagtican (Street Lot 13, Psd 26099), lot No. 47, Blk. 30 of the subdn. Plan; on the S by lot 48, Blk. 30 of the subdn. Plan; and on the W., by Calle Pasong Tamo Extension (Street Lot 8, Psd.-26099). Beginning a pt. marked "1" on the plan being S.75 deg. 52'W., 2391.89 m more or less fr. BLLM1, Np of Makati, thence S.20 deg. 39'E., 11.60 m to pt. 2; thence S.69 deg. 21'W., 32.22 m to pt. 3; thence N. 1 deg. 31'W., 15.65 m to pt 4; thence N.3 deg. 50'E., 8.45 m tp pt. 5; thence S. 86 deg. 10'E., 25.98 m to the point of beginning; containing an area of FOUR HUNDRED SIXTY SIX SQUARE METERS (466) more or less. All pts referred to are indicated on the plan & on the ground are marked by PLS Cyl. Conc. Mons., bearing true; decl. 0 deg. 37'E., date of the original survey, Dec. 10, 1923 - Jan. 9, 1924, and that of the subdn. Survey, Feb. 21-28, and Mar. 1-21, 1950." that MRA as Trustee, purchased the land in February 1981 for P811,201 covered by TCT No. 130947, details are as follows: "TCT NO. 130947 A parcel of land (Lot 48, Blk. No. 30 of the subdn. Plan Psd.-29169, being a portion of Blk. 30, described on plan Psd.-26099, GLRO Rec. No. 2029), situated in the Mun. of Makati, Prov. of Rizal. Bounded on the N., by lot No. 49, Blk. 30 of the subdn. Plan; on the NE., by lot 47, Blk. 30 of the subdn. Plan; on the SE., by Ditch (Blk. 37; Psd.-26099) and on the W., by Calle Pasong Tamo Extension (Street Lot 8, Psd.-26099). Beginning a pt. marked "1" on the plan being S.75 deg. 52'W., 2391.89 m more or less fr. BLLM1, Np of Makati, thence S.20 deg. 39'E., 11.60 m to pt. 2; thence S.69 deg. 21'W., 32.22 m to pt. 3; thence N. 1 deg, 31'W., 15.65 m to pt 4; thence N.3 deg. 50'E., 8.45 m tp pt. 5; thence S. 86 deg. 10'E., 25.98 m to the point of beginning; containing an area of FIVE HUNDRED AND SEVEN SQUARE METERS (507) more or less. All pts referred to are indicated on the plan & on the ground are marked by PLS Cyl. Conc. Mons., bearing true; decl. 0 deg. 37'E., date of the original survey, Dec. 10, 1923 - Jan. 9, 1924, and that of the subdn. Survey, Feb. 21-28, and Mar. 1-21, 1950." ICASEH that the above real estate properties with total acquisition costs of P1,277,201 were purchased based on the Trust Agreement entered into on July 1, 1998; that in 1996, JRN and MRA (Trustees) entered into a Co-investment Agreement with DMCI Project Developers, all Filipino Corporations, whereby MRA and JRN (Trustees) agreed to contribute the aforesaid parcel of land into a condominium project originally known as the West Makati Corporate Center and later renamed as Pryce Center, pursuant to the Condominium Law in exchange for certain developed and built-up floor space in the said development project: 1. To confirm the ownership of JLD (Trustor) to the condominium units, it formalized in 1998 the Trust Agreement between JLD and JRN and MRA per attached Deed of Trust. 2. Also, upon receipt by JRN and MRA (Trustees) of the condominium Certificate of Title (CCT), it turned over the aforesaid CCTs with unit Nos. 601, 602, 603, 604, 605, 606 and 607 to JLD (Trustor). and that based on the foregoing, you now reiterate your request for a ruling stating that the transfer of the aforementioned condominium units by the Trustees which involves no monetary considerations and is merely for confirmation of title in favor of the Trustor, the beneficial and real owner thereof, is not subject to either income tax, capital gains tax under section 24 (D) (1) of the Tax Code of 1997, documentary stamp tax, donor's tax and value-added tax. In reply thereto, please be informed that since the transfer of the condominium units referred to above by the Trustee in favor of the Trustor is without monetary consideration and is merely a confirmation of titles in favor of the beneficial owner, the same is not to be treated as another transfer separate and distinct from the sale between the original owner of the land and the trustee. The conveyance is merely a continuation and confirmation of title in favor of the ultimate and real beneficiary of the subject properties, hence, not subject to capital gains tax imposed under Section 24 (D) (1) of the Tax Code of 1997. (BIR Rulings DA-078-2001 dated May 4, 2001 and DA-125-97 dated March 31, 1997) Said conveyance is also not subject to value-added tax imposed under Section 106 of the same Tax Code. Similarly, no gain was realized by both the trustees and the trustor for income tax purposes. Likewise, the conveyance of the subject properties is exempt from the donor's tax imposed under Section 91 of the Tax Code, as amended, due to lack of donative intent. (BIR Ruling No. 115-94 dated July 1, 1994) Moreover, the Deeds of Trust executed to convey the aforementioned properties to the trustee are not subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. However, the notarial acknowledgement is subject to the documentary stamp of P15.00 under Section 188 of the said Code. This will serve as the authority of the appropriate Revenue District Officer/authorized Internal Revenue Officer to issue the certificate authorizing registration (CAR). 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, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service