BIR Ruling [DA-139-03]

April 29, 2003 BIR RULING [DA-139-03] 27 (D) (5); 372-92 Mr. Bernardo C. Erquieza 80 Ipo St., La Loma Quezon City S i r : This refers to your letter dated September 17, 1999 requesting for exemption from the payment of capital gains tax and documentary stamp tax. Documents submitted disclosed that you were granted by the Development Bank of the Philippines (DBP), a housing loan in the aggregate principal amount of One Hundred Twenty Thousand Pesos (P120,000.00) for the purchase of a house and lot, in accordance with the terms and conditions of its Individual Housing Loan Program (IHP) for employees; that under the terms of the IHP, the title to the property subject of the loan was required to be placed in the name of DBP, with DBP simultaneously executing a Deed of Conditional Sale in your favor, as security for the aforementioned loan; that in accordance therewith, the property acquired out of the proceeds of the loan and covered by Transfer Certificate of Title No. 301152 was duly registered in the name of DBP and the latter executed the Deed of Conditional Sale dated June 20, 1983 and its supplement to the Deed of Conditional Sale dated November 24, 1988; that the aforesaid loan was finally settled on August 31, 1999; that you are now applying for the above Title to be transferred in your name, as required by the Register of Deeds of Quezon City; and that you are of the opinion that your application for the transfer of Title of the above-quoted realty in your favor is exempt from the payment of capital gains tax for the following reasons: 1. The Deed of Transfer executed by the DBP in your favor was made without any consideration. 2. In the ruling made by Commissioner Jose U. Ong dated December 28, 1992 on a similar case, it was ruled that the transfer was not subject to capital gains tax. 3. The transfer of Title in your favor would merely be a recognition of your ownership over said realty, considering that title to the said parcel of land was transferred to the DBP only for you to obtain a housing loan. In reply, please be informed that since the realty covered by TCT No. 301152 was acquired by you, through and placed under the name of DBP, under the Individual Housing Program of the said bank wherein it is required, among others, that the realty that secures the housing loan must first be transferred in favor of DBP, then the Deed of Transfer executed by DBP transferring and conveying the said real property covered by TCT No. 301152 in your favor, without any consideration, after your full payment of your housing loan with DBP is not subject to the capital gains tax imposed under Section 27(D)(5) of the Tax Code of 1997 nor to the creditable withholding tax imposed under Section 2.57.2(J) of Revenue Regulations No. 2-98 implementing Section 57(B) of the Tax Code of 1997. CTEacH Moreover, the above-stated Deed of Transfer is not subject to the documentary stamp tax prescribed for sale and conveyances of real property under Section 196 of the Tax Code of 1997 since the Deed was executed merely to recognize your real ownership over the said realty without any monetary consideration. However, said Deed of Transfer is subject to the P15.00 documentary stamp tax imposed under Section 188 of the same Code on the acknowledgment of such deed. (BIR Ruling No. 372-92 dated December 28, 1992) 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.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group