BIR Ruling [DA-269-04]

May 17, 2004 BIR RULING [DA-269-04] Sec. 24 (D) (1) BIR R 83-99 & DA 24-00 Ms. Grace A. Jocson Unit 807 Cityland Shaw Tower Shaw Blvd. cor Saint Frances St. Mandaluyong City M a d a m : This refers to your letter dated May 13, 2003 jointly signed with Lauro S. Jocson requesting for exemption from the payment of capital gains tax in connection with the Deed of Assignment of one (1) parking slot executed by Norieta M. Contreras in your favor. It is represented that since the beginning of the Contract to Sell under Contract no. C170809P 1 dated September 13, 2002 and executed by and between Cityland Inc. and Norieta M. Contreras of the aforesaid parking slot, you were the one who paid for the down payment and its subsequent monthly amortizations which is scheduled to be paid in full for a period of six years beginning September 13, 2002 and ending September 13, 2008; that according to the policy of Cityland Incorporated, you were not qualified to purchase a parking slot from Cityland; that because of this, you had no choice but to use the name of your business partner, Norieta M. Contreras who according to Cityland is qualified to purchase such parking slot; that you entered into this transaction with the agreement that a Deed of Assignment will be executed in the near future by Norieta M. Contreras in your favor; that on May 20, 2003, you executed a Deed of Assignment Without Consideration; and that on March 12, 2004 you and Norieta M. Contreras executed a Declaration of Trust. In reply, please be informed that pursuant to Section 2.57-1 (A)(6) of Revenue Regulations No. 2-98, implementing Section 24 (D)(1) of the Tax Code of 1997, a final withholding tax of six percent (6%) is imposed on the gain presumed to have been realized on the sale, exchange or disposition of real property located in the Philippines classified as capital assets, including pacto de retro sales and other forms of conditional sales based on the gross selling price or fair market value as determined in accordance with Section 6(E) of the same tax Code, whichever is higher. From the foregoing, it is clear that only sales, exchanges or transfers or real properties are subject to the final withholding tax imposed under Section 24 (D)(1) of the Tax Code of 1997 as implemented by Revenue Regulations No. 2-98; hence, assignments of rights over realty although classified as real property under the Civil Code, are not included within the purview of the said regulations considering that in assignments of rights the assignee merely steps into the shoes of the assignor without acquiring a better right than what the assignor had in the property to which the rights assigned pertain. Moreover, a Deed of Assignment is not a Deed of Sale because what is conveyed by the assignor is not the property itself but the rights pertaining to such property. ( BIR Ruling Nos. 083-99 dated June 22, 1999 and DA-024-2000 dated January 11, 2000 ) Such being the case and since the assignment of Norieta M. Contreras' rights over the abovementioned realty in your favor is without any monetary consideration, this Office is of the opinion as it hereby holds that it is not subject to the final withholding tax imposed under Section 2.57-1 (A)(6) of Revenue Regulations No. 2-98 nor to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. However, the notarial acknowledgment of said Deed of Assignment with Assumption of Obligations is subject to the documentary stamp tax of P15.00 on certificates under Section 188 of the same Code. Nonetheless, the above assignment by Norieta M. Contreras of her rights over a Certificate of Sale covering one (1) parking slot to you did not effectively transfer the ownership over the said realty to you. What was transferred was merely the rights pertaining to the property and not the property itself. 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 as null and void. ISCTcH Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group