BIR Ruling [DA-127-97]

March 25, 1997 BIR RULING [DA-127-97] First Sarmiento Property Holdings, Inc. Second Floor, Sarmiento Building II 2316 P. Tario Extension Makati City Attention: Ms . Perla C . Arana VP-Fin . and Admin . Gentlemen : This refers to your letter dated March 18, 1997 requesting in effect for a ruling relative to the computation of the amount of documentary stamp tax payable on the proposed transfer of P. S. & Sons, Inc., Sarmiento Management Corporation, Sarmiento Securities Corporation and Sarphil Corporation of its properties in exchange for Four Million Four Hundred Eighty Nine Thousand Eighty One (4,489,081) shares of the capital stock of Vitarich Corporation) valued at Eleven Million Two Hundred Twenty Two Thousand Seven Hundred Two Pesos (P11,222,702.00) at a par value of Two Pesos & 50/100 [(P2.50) (IPO)] per share distributed as follows: cdpr Name No. of Shares P. S. & Sons, Inc. 1,819,542 Sarmiento Management Corporation 1,547,760 Sarmiento Securities Corporation 1,121,689 Sarphil Corporation 90 T o t a l 4,489,801 ========= which is the subject of BIR Ruling No. 534-97 dated March 7, 1997. In reply, please be informed that 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. (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 certificates 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. 175, Tax Code, as amended by R A. 7660). (BIR Ruling No. 412-88 dated August 25, 1988) prcd Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service) By: ALICIA L. TOMACRUZ Head Revenue Executive Assistant (Legal Service)