BIR Ruling [DA-270-96]

July 24, 1996 BIR RULING [DA-270-96] The Regional Director Revenue Region No. 19 2/F Milagros Building Illustre St., Davao City Attention: Ms . Lirio A . Cabsaba Acting Regional Director Gentlemen : This refers to your endorsement to this Office dated February 29, 1996 relative to the request for exemption from income tax/capital gains tax and documentary stamp tax on property dividends declared by JAP DEVELOPMENT COMPANY, INC. (JAP), with principal office address at E. Palma Gil St., Barrio Obrero, Davao City. It appears from the records which you have endorsed to this Office that JAP is a domestic corporation with an authorized capital stock of P5,000,000.00 divided into 5,000 shares with a par value of P1,000.00 per share; that as of December 31, 1994, JAP has a total stockholder's equity of P2,141,402.84 which include an unrestricted retained earnings of P1,141,402.84; that the Board of Directors of JAP declared property dividends to its individual stockholders of record as of December 14, 1995 covered by Transfer Certificates of Title (TCTs) Nos. T-76714, T-76713 and T-76716 issued by the Registry of Deeds for the City of Davao; and that JAP caused the consolidation of the three (3) parcels of land covered by the said TCTs, and the subdivision of the same into twenty-seven (27) separates lots. In reply, please be informed as follows: 1. The property dividends which shall be received by the stockholders of JAP Development Co., Inc., (individual citizens or residents) 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 these properties as property dividends. (Section 21(c) (2) of the Tax Code, as amended by Executive Order No. 37). 2. The Deed of Conveyance to be executed between JAP Development Co., Inc., and the recipient stockholders covering the real properties declared as property dividends, not being a sale and without monetary consideration, is not subject to the documentary stamp tax under Section 196 of the Tax Code, as amended, but only to the documentary stamp tax P15.00 on certificates under Section 188 of the Tax Code, as amended. (BIR Rulings Nos. 108-93 dated March 16, 1993; 498-93 dated December 20, 1993). This confirms your authority to issue the necessary certificate authorizing the transfer of the real properties declared as property dividends by Jap Development Co., Inc. in favor of its individual stockholders, (BIR Rulings Nos. 498-93 dated December 20, 1993; and UN 285-94 dated October 7, 1994). cd Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service) By: ALICIA L. TOMACRUZ Head Rev. Executive Assistant Legal Service