BIR Ruling [DA-288-99]

May 13, 1999 BIR RULING [DA-288-99] Far East Bank and Trust Company Far East Bank Center Senator Gil J. Puyat Avenue Makati City Attention: Mr. Redentor M. Buban Trust Banking Group-Legal Gentlemen : This refers to your letter dated June 9, 1998 requesting for a ruling as to whether or not the transfer of real properties by Prudential Life Plan, Inc. (PLPI) and Prudentialife Education Plan, Inc. (PEPI) in favor of Far East Bank and Trust Company is not subject to capital gains tax and to the corresponding documentary stamp tax. It is represented that PLPI is a domestic corporation duly organized and existing under the laws of the Philippines; that it is engaged in the business of organizing, developing and selling funeral plans and arrangements for funeral or memorial services and merchandise or articles pertinent or necessary thereto to be rendered and/or delivered in the future to subscribers; that on January 7, 1981, a Trust Agreement was entered into by and between PLPI and Far East Bank and Trust Company (FEBTC) whereby PLPI under its agreements with the subscribers to its services, is obligated to establish a fund to enable it to comply with its commitments to its planholders; that FEBTC has agreed to act as trustee and to hold and administer the funds of the trust; that on the other hand, PEPI is also a domestic corporation duly organized and existing under the laws of the Philippines; that PEPI is authorized to sell educational assistance plans as well as other pre-need plans and services to be delivered in the future to subscribers, purchasers or plan holders; that the Securities and Exchange Commission requires PEPI to establish a trust fund to which sales proceeds of the Plan shall be deposited, with a Trustee to receive, hold, invest, administer and deliver the same for payment in accordance with the provisions of the Plan; that in compliance therewith and in order to implement and carry out the provisions of the Plan, PEPI has decided to appoint FEBTC as its trustee, and which appointment the latter has accepted upon the terms and conditions set forth; and that on May 4, 1998, five (5) Deeds of Assignment were executed by PLPI and PEPI in favor of FEBTC whereby the former have offered to assign all its rights and interest over certain real properties in favor of the latter more particularly described as follows: Trustor TCT No. Location Area Trust Account No. PEPI 100875 Angeles City 198 sq. m. 203-163 PEPI 100874 Angeles City 214 sq. m. 203-163 PEPI 101658 Angeles City 546 sq. m. 203-163 PEPI 60587 Baguio City 692.5 sq. m. 203-163 PLPI 40181 La Union 380 sq. m. 203-00057 In reply, please be informed that since there is no actual transfer of ownership over the above-mentioned properties from PLPI and PEPI to FEBTC, the said transfer is not subject to the capital gains tax imposed under Section 27(D)(5) of the Tax Code of 1997. Moreover, Section 185 of Regulations No. 26 provides that the conveyances of realty, not in connection with a sale, to trustee, or other persons without any consideration are not taxable. EaHcDS Furthermore, the Deeds of Assignment executed to convey the aforementioned properties to FEBTC, as trustee to form part of the Trust Fund are 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. Finally, the transfer of the above-mentioned properties to FEBTC 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) 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.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)