BIR Ruling [DA-268-98]

June 25, 1998 BIR RULING [DA-268-98] Go Hoc & Sons, Inc. 661 Gandara Street Binondo, Manila Attention: Lydia Gan, et . Al . Gentlemen : This refers to your letter dated January 22, 1998 requesting for a ruling to the effect that your property dividend declaration is exempt from the payment of income, withholding and documentary stamp taxes. cdta Documents submitted show that on March 17, 1997 your company, a domestic corporation, declared as property dividends your three (3) parcels of land, together with the improvements thereon, described in Transfer Certificate to Title No. 4971 issued by the Register of Deeds of the City of Manila, to stockholders of records as of the same date, namely: Go Siok Cheng alias Lydia Gan, Felisa Go Cheng, Emiliana Go Uy, Carmen Go Lao, Go Siok Keng alias Gloria Go, Virginia Go Liuson, Filomena Go Dy, and Dellie Go Hoc Yap ; that a Deed of Conveyance covering the above-mentioned properties was executed by you on September 26, 1997 in favor of the stockholders; that you filed with Revenue District No. 30, Binondo, Manila, Capital Gains Tax Return (BIR Form No. 1706) invoking exemption under BIR Ruling No. 498-93; that you paid a documentary stamp tax of P15.00 on the notarial acknowledgment for the above-mentioned deed of conveyance; and that on September 26, 1997, Revenue District No. 30-Binondo, Manila, issued a Tax Clearance Certificate authorizing the transfer of the property above-mentioned to the stockholders named in the deed of conveyance. In reply, please be informed that property dividends received by the individual stockholders of Go Hoc & Sons, Inc. shall be subject to a final withholding tax of zero percent (0%) and the receiving stockholders shall not be subject to any income or capital gains tax arising from their receipt of the said real properties as property dividends pursuant to then Section 21(c)(2) of the Tax Code, as amended by Executive Order No. 37. Furthermore, under Section 24(B)(2) of the Tax Code of 1997, income forming part of retained earnings as of December 31, 1997 shall not, even if declared or distributed on or after January 1, 1998, be subject to tax on dividends. The property dividends shall be recorded at their book value in the books of both the issuing corporation and the recipient stockholders. (BIR Ruling No. DA-292-97 dated August 28, 1997) cdti Moreover, under Section 185 of Regulations No. 26, as amended, otherwise known as the Documentary Stamp Tax Regulations, conveyance of realty, not in connection with a sale, to trustees or other persons without consideration are not taxable. Considering that the transfer of said real properties to your stockholders is not in connection with a sale but as property dividends and the same is without monetary consideration, this office is of the opinion that the aforementioned deed of conveyance to effect the transfer of such property dividends to your stockholders is not subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997, as amended. The acknowledgment, however, of said deed of conveyance is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the same Code. (BIR Ruling No. DA-263-97 dated August 6, 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. aisadc Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal & Enforcement Group