BIR Ruling [DA-089-03]

March 20, 2003 BIR RULING [DA-089-03] 24 (D) (1), 196 DA-145-2000 Interhouse Corporation Mezz 4, South Center Tower 2206 Market St.,Madrigal Business Park Alabang, Muntinlupa City Attention: Mr. Felix Y. Hofilea Executive Vice-President Gentlemen : This refers to your letter dated February 17, 2003 requesting for an opinion whether the Deed of Exchange executed on the swapping of real properties to rectify an error is not subject to creditable withholding tax and documentary stamp tax. Documents submitted disclosed that: 1. Interhouse Corporation is a corporation duly registered and existing under the laws of the Philippines and principally engaged in real estate development and sale of house and lots in BF Resort, Las Pias City; 2. The aforestated corporation has constructed a duplex house on a lot identified as Blk. 5 Lot 25-A and Blk 5 Lot 25-B, Tecson St.,BF Resort Village, Las Pias City, and each of the said units has a total lot area of 183.50 sq.m.; 3. Upon completion of the house construction, the two (2) adjoining units were sold to Ernesto M. Angeles (Unit A) and Spouses El and Teresita Parungao (Unit B); 4. The lots were subsequently registered and Transfer Certificate of Title (TCT) No. T-47234 was issued to Mr. Ernesto M. Angeles and TCT 48892 was likewise issued to Spouses El and Teresita Parungao; 5. However, in the review of the above-stated titles, there appears an error in the registration of titles of the two (2) adjoining properties wherein the owners were transposed and inadvertently exchanged with one another; 6. Realizing the error, both parties, have mutually agreed to execute a Deed of Exchange on the two (2) adjoining properties, without monetary consideration or value, but merely to exchange their respective titles. In reply, please be informed that since the exchange transaction is without any monetary consideration, and considering further that the execution of the Deed of Exchange is merely for the purpose of correcting the mistake above-mentioned, the exchange of realties by and between the aforestated parties is not subject to the capital gains tax imposed under Section 24(D)(1) of the Tax Code of 1997, nor to the withholding tax imposed under Revenue Regulations No. 2-98. aASDTE Furthermore, the said swapping of real properties are not likewise subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. However, the notarial acknowledgment of the said Deed of Exchange is subject to the documentary stamp tax of P15.00 only pursuant to Section 188 of the Tax Code of 1997. (BIR Ruling No. DA-145-2000 dated March 10, 2000) 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. Very truly yours, Commissioner of Internal Revenue By: (SGD.) MILAGROS V. REGALADO Assistant Commissioner (Legal Service)