Bank of the Philippine Islands

March 28, 2008 BIR RULING [DA-212-08] 24 (D) (1); 196; DA-656-2006 Bank of the Philippine Islands BPI Building, Ayala Avenue cor. Paseo de Roxas Makati City Attention: Atty. Crisostomo J. Danguilan Assistant Vice-President Gentlemen : This refers to your letter dated February 19, 2008 requesting for exemption from the payment of capital gains tax and documentary stamp tax on the swapping of real properties to correct a mistake and without consideration. It appears that a real property was erroneously sold to, and transferred in the name of the buyer, JOMEE Real Estate Company, Inc. ("JOMEE"); that the property subject of the sale is the lot covered by TCT No. T-510755; that due to a mistake in the relocation survey, said lot covered by TCT No. T-510755 was erroneously identified as TCT No. T-510756; that Bank of the Philippine Islands (BPI) is the owner of two (2) lots covered by TCT No. T-510755 with an area of 25,921 sq. m. and TCT No. T-510756 with an area of 27,020 sq. m.; that as agreed upon, JOMEE was to purchase the parcel of land located along Pulo Road adjacent to the police outpost and the property of a certain Dominador Limcaoco; that prior to the sale, a relocation survey was conducted on the said property by Geoditic Engineer Abner M. Gadon; that on July 10, 2006 a Relocation Plan was issued by the said Geodetic Engineer which identified the said parcel of land adjacent to the police outpost as "Lot 2, Plan Psd-17884" with an area of 27, 020 sq. m. covered by TCT No. T-510756; that the other lot covered by TCT No. T-510755 is shown in the Plan as adjacent to a certain "Integrated Warehouse"; that based on the survey, BPI executed a Deed of Absolute Sale on October 10, 2006 in favor of JOMEE over the real property covered by TCT No. T-510756; that the said property adjacent to the police outpost was turned over to JOMEE who is now in possession; that after the sale, another relocation survey was conducted by Geodetic Engineer Jose Edwin L. Punza II and an error was discovered that the lot adjacent to the police outpost is actually TCT No. T-510755 with an area of 25,921 sq. m. and not TCT No. T-510756; and that due to the erroneous transfer of TCT No. T-510756 in favor of JOMEE, the parties (BPI and JOMEE) have proposed to execute a document whereby TCT No. T-510755 will be exchanged or substituted as the title subject of the Deed of Sale and that there shall be no physical transfer of lots since JOMEE is already in possession of the lot erroneously identified as TCT No. T-510756. In reply, please be informed that since the exchange transaction is without monetary consideration, and considering further that the execution of the Deed of Exchange is merely for the-Purpose of correcting the mistake above-described, the exchange of realty by and between JOMEE and BPI is not subject to capital gains tax imposed under Section 24 (D) (1) of the Tax Code of 1997, as amended, nor to the withholding tax imposed under Revenue Regulations No. 2-98, as amended. Furthermore, the said swapping of real property is not likewise subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997, as amended. However, the notarial acknowledgment of the said deed is subject to the documentary stamp tax of P15.00 only pursuant to Section 188 of the Tax Code of 1997, as amended. (BIR Ruling No. DA-656-2006 dated November 07, 2006) 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.) JAMES H. ROLDAN Assistant Commissioner Legal Service