BIR Ruling [DA-140-99]

March 9, 1999 BIR RULING [DA-140-99] Sycip Gorres Velayo & Co. 6760 Ayala Avenue 1226 Makati City Attention: Atty . E . C . Alcantara Tax Division Gentlemen : This refers to your letter dated January 16, 1998 requesting on behalf of your client, Citibank, N.A., for a confirmation of your opinion that the transfer of title to the lots by Paseo Realty to CCCC is not subject to the creditable expanded withholding tax, documentary stamp tax and donor's tax. prcd It is represented that Paseo Realty & Development Corporation (Paseo) is a domestic corporation duly registered with the Securities and Exchange Commission (SEC) with an authorized capital stock of Five Million (P5,000,000.00) Pesos divided into 500,000 common shares with a par value of P10.00 per share; that Paseo is the owner of two parcels of land covered by TCT Nos. 115642 and 115643 over which the Citibank Centre Building (Citibank) stands; that Citi Center Condominium Corporation (CCCC) is a non-stock condominium corporation duly registered with the SEC and organized pursuant to the Condominium Act of the Philippines to manage, own and hold title to the common areas of Citibank; that CCCC is the sole stockholder of Paseo; that the propose plan aims to consolidate the ownership of the real properties into CCCC; that the real properties where Citibank stands are indispensable parts of the project and the transfer of the same will convert it to a more productive use through the savings that shall be generated; and that the transfer shall be without monetary consideration. In reply, please be informed that since the transfer of the real properties to the condominium corporation, CCCC, is without any monetary consideration, no income will be generated therefrom, and a fortiori , no creditable expanded withholding tax is payable and collectible. (BIR Ruling No. 212-93 dated May 14, 1993) The transfer by Paseo of its real properties to CCCC is not subject to the documentary stamp tax imposed by Section 196 of the Tax Code of 1997 since under Section 185 of the Revised Documentary Stamp Tax Regulations (Regulations No. 26), " conveyances of realty not in connection with a sale, to trustees or other persons without consideration are not taxable " but the notarial acknowledgment is subject to the P15.00 DST imposed under Sec. 188 of the Tax Code of 1997. Furthermore, the absence of donative intent shall likewise render the transfer not subject to donor's tax imposed under Section 99 of the Tax Code of 1997. It has been held that in a direct gift, the element of donative intent must be present in the transfer of property to be donated for it to be subject to donor's tax. (BIR Ruling No. 75-97 dated July 10, 1997). 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. LLphil Very truly yours, Commissioner of Internal Revenue By: SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)