BIR Ruling [DA-141-01]

August 30, 2001 BIR RULING [DA-141-01] Judge Cesar O. Untalan METC Branch 29 Quezon City S i r : This refers to your letter dated May 25, 2001 requesting for confirmation of your opinion that the proposed Deed of Reconveyance executed by the City Mayor of the City of Mandaluyong in favor of the Roman Catholic Archbishop of Manila is exempt from taxes. The pertinent facts are as follows: On November 18, 1968, Ortigas and Company Limited Partnership donated to the then Municipality of Mandaluyong Lot 1, Block 25 with an area of 2,507 square meters covered by Transfer Certificate of Title No. 9570 located at Maysilo Street, City of Mandaluyong for the construction of a Roman Catholic chapel. However, the then Municipality of Mandaluyong inadvertently constructed therein the Jose Rizal Monument, A.T. Reyes Park and a portion of the Kaban ng Hiyas Building. The Shrine of Divine Mercy was, instead, erected at Lot 1, Block 28, Maysilo Circle, City of Mandaluyong with an area of only 1,500 square meters. To remedy the inequity, the then City Mayor of the City of Mandaluyong Hon. Benjamin Abalos, Sr., and Msgr. Salvador Jose, with the written consent of Ortigas and Company Limited Partnership, agreed to exchange the properties. In addition, the City of Mandaluyong will donate to the Roman Catholic Archbishop of Manila Lot 9-A, a portion of Road Lot 9, with an area of 530 square meters, situated at the corner of San Joaquin and San Rafael Streets, Plainview, Mandaluyong City. It is your opinion that the transaction is not subject to any tax considering that both the City of Mandaluyong and Roman Catholic Archbishop of Manila are exempt entities. In reply, please be informed that this Office finds merit with your position. In BIR Ruling No. DA-037-2001 datedMarch14, 2001, this Office ruled: DAEIHT ". . . considering that the exchange transactions are without monetary consideration and considering further that the execution of the Deeds of Exchange was merely to correct a mistake inadvertently committed by the surveyor in assigning or designating the lot numbers in the subdivision plan, this Office is of the opinion that such exchange transactions are not subject to the capital gains tax imposed under Section 24(D)(1) of the Tax Code of 1997 nor to the creditable withholding tax imposed under Section 57(B) of the Tax Code of 1997. . . . Further, the two (2) Deeds of Exchange are not likewise subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997 but the same shall be subject only to the P15.00 documentary stamp tax imposed under Section 188 of the same Tax Code. [BIR Ruling DA-068-98 datedMarch2, 1998 citing BIR Ruling No. 027093 datedJanuary15, 1993]." The ruling quoted above applies to this case. Though the document you intend to execute is a Deed of Reconveyance, it is actually a Deed of Exchange to convey Lot 1, Block 28 and Lot 9-A to the Roman Catholic Archbishop of Manila in exchange for Lot 1, Block 25 which was inadvertently used by the City of Mandaluyong as the site of the Jose Rizal Monument, A.T. Reyes Park and the Kaban ng Hiyas Building. Like in the case cited, the exchange had no monetary consideration and therefore neither subject to the capital gains tax imposed under Section 24(D)(1) nor to the creditable withholding tax imposed under Section 57(B) of the NIRC of 1997. Likewise, the intended Deed of Reconveyance is not subject to the documentary stamp tax imposed under Section 196 of the NIRC of 1997. However, it is subject to the P 15.00 documentary stamp tax imposed under Section 188 of the NIRC of 1997. This ruling is issued on the basis of the foregoing facts as represented. If, upon investigation, it is ascertained that the facts are different, this ruling is considered void. Very truly yours, (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner Legal and Inspection Group