King Capuchino Tan & Associates

May 15, 2007 BIR RULING [DA-302-07] 147-92 King Capuchino Tan & Associates 2nd Floor Belman II Building Quezon Avenue cor. Cordillera Street Quezon City Attention: Atty. Rudolph S. Capuchino Gentlemen : This refers to your letter dated April 2, 2007 stating that your client, Willy Go, and his wife, Janet Co-Go, a Chinese citizen, are the registered owners of three (3) parcels of land covered by TCT No. M-26220 issued by the Registry of Deeds for Malabon, TCT No. T-345896(M) issued by the Registry of Deeds for Meycauayan, Bulacan and CCT No. 48035 issued by the Registry of Deeds for Manila; that on January 15, 2007, the Regional Trial Court, Branch 193 of Marikina City issued a decision granting the Petition for Declaration of Nullity of Marriage filed by Willy Go; that in said decision, the Court consolidated and/or awarded the ownership of the aforementioned real properties in favor of Willy Go after finding that the subject properties were acquired through the sole effort of Willy Go as her wife was unemployed and had no means to contribute in the purchase of the same; that more importantly, the Court consolidated or awarded the subject properties to Willy Go because his wife is a Chinese citizen, and therefore disqualified by the Philippine Constitution from owning real properties pursuant to Section 14, Article XIV of the 1973 Constitution), the pertinent portion of which reads as follows: "It was also established that the property covered by Transfer Certificate of Title No. M-26620 of the Registry of Deeds for the City of Malabon. Transfer Certificate of Title No. T-345896(M) of the Registry of Deeds for Meycauayan, Bulacan and Condominium Certificate of Title No. 48035 of the Registry of Deeds for Manila which were acquired through the single effort of petitioner as respondent was never employed nor had any business during their marriage. More importantly, it is undisputed that respondent is a Chinese national (as shown by her Alien Certificate of Registration and Passport marked as Exhibits H and I respectively), and therefore disqualified to acquire real properties as ruled in the case of Thomas C. Cheesman vs. Intermediate Appellate Court, 193 SCRA 93, wherein the Supreme Court held that: Finally, the fundamental law prohibits the sale to aliens of residential land Section 14 Article XIV of the 1973 Constitution ordains that: "Save in cases of hereditary succession, no private land shall be transferred or conveyed except to individuals, corporations, or association qualified to acquire or hold lands of the public domain." Petitioner Thomas Cheesman was, of course, charged with knowledge of this prohibition. Thus, assuming that it was his intention that the lot in question be purchased by him and his wife, he acquired no right whatever over the property by virtue of that purchase and in attempting to acquire a right or interest in land, vicariously and clandestinely, he knowingly violated the Constitution, the sale as to him was null and void. In any event, he had and has no capacity or personality to question the subsequent sale of the same property by his wife on the theory that in so doing, he is merely exercising the prerogative of a husband in respect of conjugal property. To sustain such a theory would permit indirect controversion of the constitutional prohibition. If the property were to be declared conjugal, this would accord to the alien husband a not insubstantial interest and right over land, as he would then have a decisive vote as to its transfer or disposition. This is a right that the Constitution does not permit him to have. As already observed, the finding that his wife had used her own money to purchase the property cannot, and will not, at this stage of the proceedings be reviewed and overturned. But even if it were a fact that said wife had used conjugal funds to make the acquisition, the considerations just set out militate on high constitutional grounds, as against his recovering and holding the property so acquired, or any part thereof. And whether in such an event, he may recover from his wife any share of the money used for the purchase or charge her with unauthorized disposition or expenditure of conjugal funds is not now inquired into; that would be, in the premises, a purely academic exercise." aATHIE that on March 1, 2007, the aforementioned decision became final and executory; that by virtue of the said Decision, Willy Go, will now request the concerned Register of Deeds in order that the TCT Nos. M-26220 and T-345896(M) and CCT No. 48035 be cancelled and that new titles in the name of Willy Go be issued; and that there is no monetary consideration for the consolidation and/or award of the said titles because it simply granted the ownership of the real properties to Willy Go as the sole and absolute owner. In connection therewith, you now request a ruling that the consolidation and/or award of the above-mentioned properties to Willy Go, without any monetary consideration, by virtue of the Court Order is exempt from the payment of capital gains tax and the corresponding documentary stamp tax. In reply thereto, please be informed that since the consolidation and/or award of the titles over the real properties to Willy Go is not in connection with a sale, exchange or other disposition of the said properties but merely surrendering the properties to its rightful owner, the same is not subject to capital gains tax prescribed in Section 24 (D) (1) of the Tax Code of 1997. This is fortified in BIR Ruling No. 147-92 dated May 8, 1992, where this Office held: HIEASa ". . . the transfer of the Q.C. property effected by the heirs of the estate of Edward M. Grimm in the Deed of Partition in favor of GP and Company is not subject to capital gains tax imposed under Section 21(e) of the Tax Code, since the transfer of the title in favor of GP and Company is merely a formality of transferring to the beneficial owner thereof the title to the same and in order that the title to the said property may be registered in the name of its rightful owner without any monetary consideration." Moreover, conveyance of the realty not in connection with a sale, to trustees or other persons without consideration is not taxable pursuant to Section 185 of Regulations No. 26, otherwise known as the Documentary Stamp Tax Regulations. It is settled that the consolidation and/or award by virtue of Court Order in favor of Willy Go, the real owner, and without monetary consideration, is not subject to the documentary stamp tax on conveyances of real property under Section 196 of the Tax Code of 1997, as amended. However, the notarial acknowledgment is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the said Code, as amended. Accordingly, this serves as an authority for the Revenue District Officer concerned to issue the corresponding Certificate Authorizing Registration (CAR) in favor of Willy Go the real owner of the above-mentioned properties covered by TCT Nos. M-26220 and T-345896(M) and CCT No. 48035. 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, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service