BIR Ruling [DA-239-04]

May 7, 2004 BIR RULING [DA-239-04] Art. 1475 Civil Code; 180-99 Mr. Edgardo M. Pineda 2340 Milflores Street Dasmarias Village Makati City S i r : This refers to your letter dated July 10, 2001 stating that Spouses Edgardo and Maria Lourdes Pineda (Spouses Pineda), are the absolute and registered owners of a parcel of land together with the improvements thereon located at 2340 Milflores Street, Dasmarias Village, Makati City covered by TCT No. T-56971 issued by the Registry of Deeds of Metro Manila containing an area of 1,262 square meters; that on July 1, 1993, a Deed of Conditional Sale of a parcel of land together with the improvements thereon was executed by Spouses Pineda and Margaux Holdings Corporation, represented by its duly authorized representative, Mr. Antonio V. Roces for and in consideration of P19,000,000.00 with initial payment of P2,500,000.00 upon signing of the said document and the remaining balance payable in seven (7) annual installments of P2,000,000.00 and the final payment on July 1, 2001 in the amount of P2,500,000.00; that in June 2001, a Deed of Absolute Sale was executed by and between Spouses Pineda in favor of Margaux Holdings Corporation over the said property; and that on July 5, 2001, Spouses Pineda paid the capital gains tax and the corresponding documentary stamp tax in the respective amounts of P1,140,000.00 and P285,000.00 as evidenced by the Capital Gains Tax Return and Documentary Stamp Tax Return. Based on the foregoing representations, you are now requesting a ruling that for purposes of taxation, the reckoning date of the sale of the above-mentioned property by Spouses Pineda to Margaux Holdings Corporation should be the date of the execution of the Deed of Conditional Sale and therefore the taxable base in computing the capital gains tax and documentary stamp tax shall be the fair market value at the time of the execution of the Deed of Conditional Sale; and for the issuance of the corresponding Certificate Authorizing Registration (CAR) so that title to the above property may now be registered in the name of Margaux Holdings Corporation." In reply thereto, please be informed as follows: 1. Article 1475 of the Civil Code of the Philippines provides "The contract of sale is perfected at the moment there is a meeting of the minds upon the thing which is the object of the contract and upon the price. "From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of the contract." There can be no uncertainty that the contract of purchase and sale is perfected from the moment the parties have agreed upon a determinate thing i.e. , the object of the contract and a price certain therefor, even if neither is delivered. Thus, delivery of the thing sold is not necessary for the perfection of the contract. In the instant case, there is indeed a perfected sale as the seller, Spouses Pineda, has agreed to sell and had actually sold the above-mentioned property to Margaux Holdings Corporation while the latter had agreed to pay the contract price therefor, although delivery had not been effected until the total contract price had been fully paid on July 1, 2001. Accordingly, it is the opinion of this Office that although the Deed of Absolute Sale was issued only in July 2001, the taxable base for purposes of computing the capital gains tax and the corresponding documentary stamp tax due on the said sale shall be the zonal value or fair market value existing at the time of the execution of the Deed of Conditional Sale by the parties. ( BIR Ruling No. 180-99 dated November 24, 1999 ) This will therefore, serve as an authority of the Revenue District Officer, RDO No. 50, South Makati, to issue the Certificate Authorizing Registration (CAR) of the above-mentioned property in favor of Margaux Holdings Corporation upon presentation of the evidence of payment of the capital gains tax and the corresponding documentary stamp tax due on the said sale. 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 & Inspection Group