BIR Ruling [DA-293-97]

August 29, 1997 BIR RULING [DA-293-97] Punongbayan & Araullo 6th Floor, Vernida IV Building Alfaro St., Salcedo Village 1200 Makati City Attention: Atty. Vic C. Mamalateo Tax Partner Gentlemen: This refers to your letter dated June 5, 1997 requesting for confirmation of the previous position of this Office relative to the basis of the amount of documentary stamp tax payable on the Deed of Assignment executed by your client, Spouses Roberto G. Villanueva, Jr. and Lucille R. Villanueva, in favor of Scorpio, Inc., transferring real properties in exchange for shares of stock to be distributed to the Spouses, which is the subject of BIR Ruling No. S34-470-96 dated October 24, 1996. It is represented that Revenue District Office No. 50 South Makati insisted that your clients should pay the documentary stamp tax on the Deed of Assignment based on the zonal value of the real properties exchanged despite two rulings issued in favor of the Spouses that the value of the stocks issued in exchange for the real properties shall be the basis of the documentary stamp tax to be paid and not the zonal value of the real properties. In reply, we reiterate this Office's previous stand that the value of the stocks issued in exchange for the real properties shall be the basis of the documentary stamp tax to be paid on the Deed of Assignment. A conveyance or deed whereby land is assigned or transferred to the purchaser is subject to documentary stamp tax based on the consideration or value received or contracted to be paid for such realty. (Sec. 196, Tax Code, as amended) A stock in a corporation is a valuable consideration for transfer of real property (Section 177, Documentary Stamp Tax Regulations). Accordingly, if real properties are exchanged for stocks in a corporation, the latter (shares of stock) is the consideration, the value of which shall be the basis of the documentary stamp tax due on the aforesaid Deed of Assignment. (BIR Ruling No. 259-88) Accordingly, the zonal value of the real properties cannot be considered as the basis in computing the documentary stamp tax. IDCcEa This serves as your authority to cause the payment of the documentary stamp tax based on the value of the stocks issued in exchange for the real properties and not on the zonal value of the real properties. Very truly yours, (SGD.) LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue