Mr. Romarico De Guzman

May 18, 2007 BIR RULING [DA-311-07] DA 145-06 Mr. Romarico De Guzman 22 C2 Woodside Homes Doa Hemday Avenue Kristong Hari Quezon City S i r : This refers to your letter dated April 12, 2007 stating that Alberto K. Acosta married to Elenita C. Acosta has entered into a Contract with City and Land Developers, Inc., a corporation organized and existing under the laws of the Philippines, for the purchase on installment a condominium unit more particularly described under Contract to Sell No. C530011, Project Name Grand Emerald Tower and located at F. Ortigas Road, Pasig City; and that a Deed of Assignment with Assumption of Obligations will be executed by Alberto K. Acosta married to Elenita C. Acosta, as the Assignor, in your favor, as the Assignee, whereby the former shall assign, transfer, sell and convey all the rights, interests or titles of the former including his obligations under the aforementioned Contract. In connection therewith, you now request a ruling that the transfer of rights over a condominium unit by Alberto K. Acosta and Elenita C. Acosta in your favor is exempt from the capital gains tax imposed under Section 24 (D) (1) of the Tax Code of 1997. In reply thereto, please be informed that pursuant to Section 2.57-1 (A) (6) of Revenue Regulations No. 2-98, as amended, 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 said Code, whichever is higher. From the foregoing, it is clear that only sales, exchanges or transfers of 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 DA024-00 dated January 11, 2000) cHITCS Nonetheless, if the assignment generates gain on the part of the assignor, the gain is taxable under the regular rates. SUCH BEING THE CASE, this Office holds that the aforesaid transfer of rights 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, as amended. However, the notarial acknowledgment of said Deed is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the said Code. 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