Atty. Daniel F. Furaque

March 17, 2008 BIR RULING [DA-168-08] Secs. 24 (D) (1); 196; 188; DA-195-2000 dtd. 03/30/00 Atty. Daniel F. Furaque Suite 401 Chateau de Baie Condo. 149 Roxas Blvd., Paraaque City S i r : This refers to your letter dated August 5, 2007, in behalf of your client, THE REGALIA GROUP CORPORATION, of 150 P. Tuazon St., Cubao, Quezon City, requesting a confirmation of your opinion that since the sale of the Condominium units was already cancelled and nullified pursuant to a Court's decision, there is no basis for the tax imposition on the transaction, thereby the taxes paid by your client should be refunded. It is represented that The Regalia Group Corporation (TRGC/Regalia, for short) sold three (3) condominium units to Mr. Antonio G. Lopez and to Shoe Specialist, Inc. covered by Condominium Certificate of Titles (CCTs) Nos. N-24832; N-25178; and N-25176, all of the Registry of Deeds of Quezon City; that the proper taxes of the transaction and sale of the said units were duly paid to the Government by TRGC/Regalia; that however, there was a legal issue that attended the sale which controversy eventually reached the Court of Appeals; that during the pendency of the case in Court a Compromise Agreement was entered into by TRGC/Regalia and Mr. Lopez whereby it was agreed upon that the three (3) Condominium Certificates of Titles (CCTs) be cancelled, nullified and set aside and the titles and ownership on the properties be reverted to TRGC/Regalia; that the Compromise Agreement was approved by the Court of Appeals and the Entry of Judgment incorporating the approval of the Compromise Agreement dated February 27, 2007 was issued on May 29, 2007; that a Deed of Reconveyance was executed by Antonio G. Lopez in his personal capacity and as President of Shoe Specialist, Inc. on October 18, 2007, in favor of TRGC/Regalia for the reconveyance of the three (3) CCTs to the latter; that in the same deed it was disclosed that TRGC/Regalia had already reimbursed the former the selling price of the Units to their full satisfaction. TASCEc In reply, please be informed that since the reconveyance of the subject properties in favor of TRGC/Regalia is in consonance with the decision of the Court of Appeals approving the Compromise Agreement entered into by the parties and is without monetary consideration, it is 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 prescribed under Revenue Regulations No. 2-98, implementing Section 57 (B) of the Tax Code of 1997. Furthermore, it is not subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. However, the notarial acknowledgment to the said deed of conveyance is subject to the documentary stamp of P15.00 only pursuant to Section 188 of the Tax Code of 1997. (BIR Ruling No. 027-93 dated January 15, 1993) However, the period within which to claim the refund of the taxes your client paid on the cancelled transaction has already lapsed pursuant to Section 204 (C) of the Tax Code of 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. Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service