BIR Ruling [DA-101-01]

June 1, 2001 BIR RULING [DA-101-01] ATR-Kim Eng Capital Partners, Inc . 17/F Tower One & Exchange Plaza Ayala Triangle, Ayala Avenue Makati City Attention: Messrs . Abelardo V . Cortez Director/Trust Officer and Felipe A . Magno Trust Operations Officer Gentlemen : This refers to your letter dated June 13, 2000 requesting for exemption from the payment of capital gains tax/creditable withholding tax, documentary stamp tax and other taxes which may be due relative to the Deed of Conveyance executed by the Professional Group Plans, Inc. (PGPI), as Trustor, in favor of ATR-Kim Eng Capital Partners, Inc., as Trustee, (Trustee) for and on behalf of ATR-Kim Eng Capital Partners Trust Account 99-TA-01 (Beneficiary). It appears that on January 28, 2000, a Deed of Conveyance was executed by and between the Trustor and the Trustee whereby the former transferred and conveyed to the latter the legal and beneficial title and all appurtenant rights and interest over the following properties and more particularly described as follows: TCT No. Location Area (sq.m.) Cost 148112 Cebu City 302 sq. m. P42,701,519.78 148113 Cebu City 400 sq. m. 56,558,304.34 140307 Cebu City 302 sq. m. 42,701,519.78 263828 Davao City 1,000 sq.m. 28,273,421.97 that pursuant to the said Agreement, it was agreed that all expenses incidental to the execution and registration of the aforesaid Agreement, including documentary stamps, transfer fees, registration expenses, capital gains tax and other assessments, if any, shall be for the account of the Trustor; and that on March 22, 2000, an Addendum to the aforementioned Deed of Conveyance was executed by the parties for the purpose of indicating the value of each parcel of land comprising the subject property as required by the Securities and Exchange Commission in its letter dated March 2, 2000. EATCcI In reply thereto, please be informed Section 27(D)(5) of the Tax Code of 1997 provides that a final tax of six percent (6%) is hereby imposed on the gains presumed to have been realized on the sale, exchange or disposition of lands and/or buildings which are not actually used in the business of a corporation and are treated as capital assets, based on the gross selling price or fair market value as determined in accordance with Section 6(E) of the said Code, whichever is higher, of such lands and/or buildings. In the instant case, since this a resulting trust in view of the owner's intention to create a trust, i.e., the transfer of the aforesaid properties in the name of ATR-Kim Eng Capital Partners, Inc., as Trustees, for and on behalf of ATR-Kim Eng Capital Partners Trust Account 99-TA-01, as beneficiary, is without monetary consideration and the Trustee acknowledges and confirms the title and ownership over the above-mentioned properties of the latter, this Office is of the opinion as it hereby holds that the transfer of the aforesaid properties in favor of ATR-Kim Eng Capital Partners, Inc. by way of Deed of Conveyance is not subject to capital gains tax imposed under Section 27(D)(5) of the Tax Code of 1997 nor to the creditable withholding tax prescribed in Revenue Regulations No. 2-98. Moreover, Section 185 of Regulations No. 26 provides that conveyances of realty, not in connection with a sale, to trustees or other persons without consideration are not taxable. Accordingly, the Deed of Conveyance executed by and between PGPI, as Trustor, in favor of ATR-Kim Eng Capital Partners, Inc., as Trustee, for and on behalf of ATR-Kim Eng Capital Partners Trust Account No. 99-TA-01, is not subject to documentary stamp tax imposed under Section 196 of the Tax Code of 1997 but the acknowledgment thereof is subject to the P15.00 documentary stamp tax prescribed in Section 188 of the said Code. (BIR Ruling No. DA 509-98 dated November 11, 1998) Finally, the above transaction is not subject to donor's tax imposed under Section 99 of the Tax Code of 1997 as there is no intention to donate on the part of the parties. IN VIEW OF THE FOREGOING, the aforementioned real properties may now be registered by the Registry of Deeds concerned in the name of ATR-Kim Eng Capital Partners, Inc. as Trustee for and on behalf of ATR-Kim Eng Capital Partners Trust Account 99-TA-01. 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, (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner Legal and Inspection Group