BIR Ruling [DA-207-05]

April 26, 2005 BIR RULING [DA-207-05] 24 (D) (1); DA-078-01; DA-125-97 Lopez and Co. LFC Center, 2518 Leiva Street Sta. Ana, Manila Attention: Mr. Restituto T. Lopez Gentlemen : This refers to your letter dated January 27, 2005 requesting for a ruling on the tax implication of the transfer by your client, Multihold Investor Corporation (Trustor), of several Pryce Center condominium units to its Trustee, Manpower Resources of Asia, Inc. It is represented that the above-named corporations are all corporations duly organized and existing under Philippines laws; that the trustee, with office address located at 2598 Manchas St., Brgy. Sta. Cruz, Makati City was duly created and organized to provide or furnish all forms of services relating to placement of land-based workers and to engage in contracting, enlisting and recruiting workers for local or foreign postings; that the Trustor, with registered office address located at 5th Floor Valero Tower, 122 Valero Street, Salcedo Village, Makati City was incorporated on February 26, 1981 to purchase, acquire, own, lease, sell and convey properties such as lands, buildings, factories and warehouses, equipment and other personal properties and to pay in cash, shares of its capital stock, debentures and other evidences of indebtedness, or other securities, as may be deemed expedient, for any business or property acquired by the Corporation; that in 1981, Trustor purchased a parcel of land containing an area of 507 sq. m. more or less located at Pasong Tamo Street, Makati City; that during the negotiation of the sale, Trustor, as a newly incorporated entity and without track record nor credit facilities, decided to avail of Trustee's credit facilities with the Far East Bank and Trust Company to finance its purchase of the said land; that the trustee, as the beneficial and real owner, was made to appear as vendee in the Absolute Deed of Sale and subsequently in the Transfer Certificate of Title(TCT) No. 130947; that as a consequence of the Trust Agreement, Trustee did not record in its book the land as its asset; that instead, the Trustor, beginning calendar year 1981 had booked the said parcel of land as its asset and paid the yearly real estate taxes due on the said property; that in 1996, Trustee on behalf of the Trustor entered into a co-investment agreement with DMCI-PDI, JRN Realty Corporation and CHATIN Realty Inc., all Filipino corporations whereby the Trustee acting on behalf of the Trustor agreed to contribute the aforesaid parcel of land into a condominium project originally known as the West Makati Corporate Center and later renamed as Pryce Center, pursuant to the Condominium Law in exchange for the Pryce Center condominium units listed below together with the improvements thereon as follows: CCT UNIT AREA IN SQ. METER NO. NO. 66374 801 110.95 inclusive of one (1) parking lot 66375 802 73.810 -do- 66376 803 107.940 -do- 66377 804 123.860 -do- 66378 805 89.260 -do- 66379 806 92.13 -do- 66380 807 121.45 -do- that to confirm the ownership of the Trustor to the condominium units, it formalized in 1998 a Trust Agreement wherein the Trustee recognized the right and interest of the Trustor over the said condominium units as the real owner thereof; that upon receipt by the Trustee of the Condominium Certificate of Title (CCT), it turned over the CCTs to the Trustor; that subsequently thereafter, the Trustor, as the owner, leased the said office condominium units; and that the Trustor show that the condominium units referred to have been fully disclosed as assets owned by it under note 4 of the notes to the financial statements. In reply thereto, please be informed that since the transfer of the condominium units referred to above by the Trustee in favor of the Trustor is without monetary consideration and is merely a confirmation of titles in favor of the beneficial owner, the same is not to be treated as another transfer separate and distinct from the sale between the original owner of the land and the trustee. The conveyance is merely a continuation and confirmation of title in favor of the ultimate and real beneficiary of the subject properties, hence, not subject to capital gains tax imposed under Section (D)(1) of the Tax Code of 1997. (BIR Rulings DA-078-2001 dated May 4, 2001 and DA-125-97 dated March 31, 1997) Likewise, the conveyance of the subject properties is exempt from the donor's tax imposed under Section 91 of the Tax Code, as amended, due to lack of donative intent. (BIR Ruling No. 115-94 dated July 1, 1994) Moreover, the Deeds of Trust executed to convey the aforementioned properties to the trustee is not subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. However, the notarial acknowledgement is subject to the documentary stamp of P15.00 under Section 188 of the said Code. aESICD This will serve as the authority of the appropriate Revenue District Officer/authorized Internal Revenue Officer to issue the certificate authorizing registration (CAR). 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