BIR Ruling [DA-222-00]

April 27, 2000 BIR RULING [DA-222-00] Tan Concepcion & Bawagan Suites 2104-2106 Medical Plaza Ortigas Building San Miguel Avenue, Ortigas Center Pasig City Attention: Atty . Fe L . Concepcion Gentlemen : This refers to your letter dated March 18, 2000 stating that your client, CEI Properties, Inc. (CEIP), as buyer, had entered into and executed five (5) Deeds of Absolute Sale with different vendors/sellers involving the following properties and more particularly described, to wit: Seller's Name TCT No. Location Area (sq. m.) Consideration Date of Notarization Leonila 8681 issued by Ibayo Ususan, 1,233.25 sq. m. P3,453,100.00 Dec. 1, 1998 Manalo the Registry of Taguig, Metro married to Deeds for Manila Claro Pasig Marcelino Leonila Santos 9860 issued by Barrio Ususan 4,810 sq. m.. 14,430,000.00 Nov. 12, 1998 Bulaon the Registry of Taguig Deeds for Pasig Leonila Santos 3192 issued by Barrio Ususan 3,263 sq. m. 9,789,000.00 Nov. 12, 1998 Bulaon the Registry of Taguig Deeds for Pasig Juliana Manalo 8690 issued by Ibayo, Ususan 1,233.25 sq. m. 3,453,100.00 Dec. 1, 1998 married to the Registry of Taguig Liberato Deeds for Marcelino Pasig Artemio OCT No. 1029 Ibayo, Ususan 3,458 sq. m. 12,103,000.00 Mar. 26, 1999 Roldan married issued by the Taguig to Catalina Registry of Roldan Deeds for Pasig that the capital gains and the corresponding documentary stamp taxes have already been paid and settled by the respective sellers; that while CEIP appeared as the recorded vendee in the afore-said Deeds of Absolute Sale, it was merely acting as a trustee on behalf of its principal, Crown Equities, Inc. (CEI), which was the true and beneficial owner of the properties; that CEIP acknowledged that the funds used in acquiring the above-mentioned properties belonged to CEI and that the documents of sale were recorded in CEIP's name as buyer only for convenience, it being the intention of the parties that CEIP will hold whatever interest is thereby acquired in trust and for the benefit of CEI; and that on April 8, 1999, a Declaration of Trust and Undertaking to Convey was executed by and between CEIP, as Trustee, and CEI, as Trustor, whereby the former transferred and conveyed to the latter the above-mentioned properties so that titles to the properties may be issued in CEI's favor. In connection therewith, you now request confirmation of your opinion that "1. Since no consideration is involved in the transfer from CEIP to CEI, the same being a mere confirmation of title in favor of the ultimate and real beneficiary of the properties, no corporate income tax accrued and became collectible under the creditable expanded withholding tax provisions of Revenue Regulations No. 2-98; "2. The transfer is not subject to 10% value-added tax because the properties are not held primarily for sale to customers or for lease in the ordinary course of business; "3. There being no donative intent on the part of CEIP, the transfer is exempt from the donor's tax; and "4. The Deed of Transfer is not subject to the documentary stamp tax imposed under Section 196 of the Tax Code since there is no monetary consideration involved." In reply thereto, please be informed that your opinion is hereby confirmed as follows: 1. The conveyance of the aforementioned properties from CEIP to CEI, as the assignee of CEIP to be effected through a Declaration of Trust and Undertaking to Convey is not subject to capital gains tax imposed under Section 24(D)(1) of the Tax Code of 1997 nor to the creditable withholding tax prescribed in Revenue Regulations No. 2-98. Considering that the transfer is not for monetary consideration and merely acknowledges and confirms the title and ownership over the above-mentioned properties of CEI. (BIR Ruling No. 115-94 dated July 1, 1994) 2. The transfer of the above-mentioned properties to CEI is likewise not subject to the 10% value-added tax because the said properties are not held primarily for sale to customers or for lease in the ordinary course of business. 3. The transfer of the above-mentioned properties to CEI without any consideration is not subject to gift tax donor's tax imposed under Section 99 of the Tax Code of 1997, since there is not donative intent on the part of the parties. (BIR Ruling No. 061-93 dated February 10, 1993) 4. Finally, the Declaration of Trust and Undertaking to Convey executed by and between CEIP and CEI whereby former will convey to the latter the aforementioned properties without monetary consideration is likewise not subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. However, the notarial acknowledgment is subject to the documentary stamp tax of P15.00 under Section 188 of the said 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. llcd Very truly yours, Commissioner of Internal Revenue By: (SGD.) MILAGROS V. REGALADO Acting Assistant Commissioner (Legal Service)