BIR Ruling [DA-157-02]

September 11, 2002 BIR RULING [DA-157-02] Sec. 24 (D) (1) BIR Ruling No. 0-83-99 Ms. Estela Marie H. Sunga 90-B, 7th Avenue Cubao, Quezon City M a d a m : This refers to your letter dated June 31, 2002 requesting, in effect, for a ruling that the transfer of your rights over a realty in favor of Elizabeth L. Chang is exempt from the capital gains tax imposed under Section 24(D)(1) of the Tax Code of 1997. Documents show that on December 27, 2000, you entered into a Contract to Sell with City & Land Developers, Inc. to purchase a condominium unit described as Unit 2307 of City and Land Mega Plaza, containing a floor area of Thirty Five and 890/1000 (35.890) square meters, more or less, situated at ADB Avenue, corner Garnet, Ortigas Center, at an installment price of One Million Five Hundred Fifty Thousand Two Hundred Forty Three Pesos and Ten Centavos (P1,550,243.10) payable in a period of sixty (60) months, from January 27, 2001 until December 27, 2005, at a monthly amortization of Twenty Six Thousand Nine Hundred Sixty Six Pesos and Seventy Centavos (P26,966.70); that you have paid seventeen (17) monthly amortizations, with unpaid amortizations for forty three (43) months; and that only July 3, 2002, a Deed of Transfer of Rights with Assumption of Obligations was executed by and between you and Elizabeth L. Chang whereby you transferred your rights over the above-mentioned property to the latter; that by virtue of such Deed of Transfer of Rights with Assumption of Obligations, Elizabeth L. Chang simply steps into the shoes of Estela Marie H. Sunga for the purchase of the said property; and that a Deed of Sale shall be subsequently executed in favor of Elizabeth L. Chang. In reply, please be informed that pursuant to Section 24(D)(1) of the Tax Code of 1997, a final tax of six percent (6%) is imposed on the gain presumed to have been realized by the seller from the sale, exchange or disposition of real property located in the Philippines classified as capital assets, including pacto de retro sales and other forms of conditional sales based on the gross selling price or fair market value as determined in accordance with Section 6(E) of the same Tax Code, whichever is higher. From the foregoing, it is clear that only sales, exchanges or transfers of real properties are subject to the 6% capital gains tax imposed under Section 24(D)(1) of the Tax Code of 1997, hence, assignments of rights over realty although classified as real property under the Civil Code, are not included within the purview of the said regulations considering that in assignments of rights the assignee merely steps into the shoes of the assignor without acquiring a better right then what the assignor had in the property to which the rights assigned pertain. Moreover, Deed of Assignment is not a Deed of Sale because what is conveyed by the assignor is not the property itself but the rights pertaining to such property. (BIR Ruling Nos. 083-99 dated June 22, 1999 and DA-024-2000 dated January 11, 2000) Such being the case and since the transfer of your rights over the above mentioned realty in favor of Elizabeth L. Chang is without any monetary consideration, the Deed of Assignment being equivalent to a Contract to Sell to which Elizabeth L. Chang is merely stepping into, this Office is of the opinion as it hereby holds that it is not subject to the capital gains tax imposed under Section 24(D)(1) of the Tax Code of 1997, nor to the documentary stamp tax imposed under Section 196 of the same Code. However, the notarial acknowledgement of said Transfer of Rights with Assumption of Obligations is subject to the documentary stamp tax of P15.00 on certificates under Section 188 of the Tax Code. 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