Mr. Francisco S. Campos

June 10, 2008 BIR RULING [DA-348-08] 24 (D) (1); 196; RR 2-98; DA-054-2000 Mr. Francisco S. Campos No. 3, Tampico Street San Lorenzo Village, Makati City S i r : This refers to your letter dated April 3, 2008 requesting in effect, for a ruling that the transfer of your rights over a realty in favor of Francisco L. Campos, Jr. is exempt from payment of the capital gains tax imposed under Section 24 (D) (1) of the Tax Code of 1997, as amended. Documents submitted disclosed that on May 17, 2005, a Contract to Sell was executed between you and Cityland Development Corporation ("Cityland"), whereby you bought from Cityland, on an installment basis, a residential condominium unit in its Rada Regency Project ("Project") located at Rada Street (Thailand), Legaspi, Makati City; that at the time of said purchase, the Project was still in its pre-selling stage or that its construction has not been started yet; that on May 10, 2006 or almost a year after the execution of the Contract to Sell and upon completion of the subject or allotted condominium unit, you executed a Deed of Assignment with Assumption of Obligations in favor of your son, Francisco L. Campos, Jr., wherein you transferred your rights over the abovementioned property with the condition that he would be directly responsible for all amounts due and payable to Cityland; that said transaction is without any monetary consideration; and that all the payments you made to Cityland were reimbursed to you by Francisco L. Campos, Jr. cEASTa In reply, 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, as amended, 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 same Tax 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 amended, as implemented by Revenue Regulations No. 2-98, as amended; 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 No. 054-2000 dated January 31, 2000 citing BIR Ruling No. 174-90 dated September 10, 1990). Such being the case and since the transfer of your rights over the abovementioned realty in favor of Francisco L. Campos, Jr., is without monetary consideration as the amount you received from the latter was only a reimbursement of the amount you paid to Cityland, this Office is of the opinion as it hereby holds that it is not subject to the final withholding tax imposed under Section 2.57-1 (A) (6) of Revenue Regulations No. 2-98, as amended. Moreover, the Deed of Assignment with Assumption of Obligations is not subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997, but subject to the documentary stamp tax of P15.00 on certificates imposed under Section 188 of the same 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. aAHSEC Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service