BIR Ruling [DA-315-06]

May 11, 2006 BIR RULING [DA-315-06] Crevel International, Inc . Unit 2408 Cityland 10, Tower 1 6815 H.V. dela Costa Street Ayala Avenue North Makati City Attention: Ms. Evelyn V. Salabit General Manager Gentlemen : This refers to your letter dated October 28, 2005 stating that on May 28, 2005, a Memorandum of Agreement was entered into by and among Christina King Hung Luk, an American citizen and residing at No. 25 Leonie Hill Road, 14-04, Grangeford Apartment, Singapore 239196 (LUK for brevity); Elizabeth P. Romualdo, a Filipino citizen and residing at 16 J. Cabarrus Street, BF Homes, Paraaque City (ROMUALDO for brevity); and Evelyn V. Salabit, a Filipino citizen and residing at No. 23 London Street, Ciudad Grande, Pasig City (SALABIT for brevity); that the above-named parties formed a corporation under the name CREVEL International, Inc. (CREVEL); that CREVEL through its Board decided to acquire an office condominium in Makati for the primary purpose of renting the same to Dataprep (Phils.), Inc (DATAPREP), a corporation which is majority-owned by LUK, ROMUALDO and SALABIT so that DATAPREP can avail of an office at a reasonable price; that at the time of the acquisition of the unit, it was necessary for DATAPREP to move out of its former location at the soonest possible time so that the benefits of a reduced rental expense can be realized sooner; that it was determined that the amount of P1,600,000.00 was necessary to complete the acquisition of the condominium unit covered by CCT No. 29720 and located at Unit 2408 Cityland 10, Tower 1, 6815 H.V. dela Costa Street, Ayala Avenue North, Makati City; and that to facilitate the acquisition of the loan from the United Coconut Planters Bank, ROMUALDO has applied the aforesaid loan in her name but for the account of CREVEL. In connection therewith, you now request for an opinion that the transfer of the title over the condominium unit, without consideration, by ROMUALDO, as Trustee, in favor of the beneficial owner, CREVEL, is not subject to capital gains tax, creditable withholding tax, donor's tax and the corresponding documentary stamp tax. EcHTCD In reply thereto, please be informed as follows (1) The transfer of title over the condominium unit by ROMUALDO, as Trustee, to CREVEL, as Trustor, to be effected through a Memorandum of Agreement is not subject to capital gains tax imposed under Section 24(D)(1) of the Tax Code of 1997 nor to the creditable withholding tax prescribed in Revenue Regulations No. 2-98, as amended, considering that the transfer is not for monetary consideration and merely acknowledges and confirms the title and ownership over the condominium unit of CREVEL. ( BIR Ruling No. DA222-00 dated April 27, 2000 ) (2) The transfer of title over the condominium unit to CREVEL without any monetary consideration is not subject to gift tax imposed under Section 99 of the Tax Code of 1997, since there is no donative intent on the part of the parties. ( BIR Ruling No. 061-93 dated February 10, 1993 ) (3) Finally, the Memorandum of Agreement to be executed by the parties with ROMUALDO, as Trustee, and CREVEL, as Trustor, whereby the former will convey to the latter the condominium unit without monetary consideration is likewise 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. 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