BIR Ruling [DA-382-04]

July 12, 2004 BIR RULING [DA-382-04] Bank of the Philippine Islands BPI Building Ayala Avenue corner Paseo de Roxas Makati City Attention: Ms. Ma. Leonora V. Mendoza Senior Manager Gentlemen : This refers to your letter dated January 8, 2004 requesting on behalf of Citytrust Cebu Realty Holdings, Inc. (CCRHI) for confirmation of your opinion that the distribution in liquidation of the assets of CCRHI consisting of a parcel of land to its sole stockholder, the BPI Group of Companies Retirement Fund, is not subject to capital gains tax and the corresponding documentary stamp tax. It is represented that on January 28, 1998, at a Special Meeting of the stockholders of CCRHI, at which meeting 99.96% of the outstanding shares of the capital of the corporation was present, the Board of Directors have resolved and approved the dissolution of CCRHI by shortening the corporate life to March 31, 1998; that the Securities and Exchange Commission (SEC) has approved the dissolution of CCHRI on July 13, 2001; that pursuant to said approval, CCRHI continues to exist for the purpose of winding up its affairs, among others to convey its property and divide its assets; that the CCRHI is the true and lawful owner of a parcel of land located in Panay Road, Cebu Business Park, Barangay Mabolo, Cebu City covered by TCT No. 134866 issued by the Registry of Deeds for Cebu City containing an area of 1,748 square meters; and that the Bank of the Philippine Islands as Trustee of the BPI Group of Companies Retirement Fund, a duly qualified BIR-registered employees retirement benefit plan, is the sole stockholder of CCRHI. In reply thereto, please be informed that this Office has already occasioned to rule on the matter, when it said in BIR Ruling No. 059-90 dated April 17, 1990 that ". . . a conveyance distributing in liquidation the assets of a corporation consisting of real estate without consideration to an owner of its capital stock is not subject to the documentary stamp tax imposed under Section 196 of the Tax Code, as amended. Accordingly, your opinion that the distribution in liquidation of the assets of Owl, consisting of land and building to its sole stockholder, the SGV & Company Provident Plan, a duly qualified BIR-registered tax-exempt employee benefit plan is not subject to documentary stamp tax is hereby confirmed. "Moreover, Revenue Regulations No. 1-90 does not apply to transfer in complete liquidation where the assets of the liquidating corporation are transferred to its stockholders in exchange for the surrender of the latter's shares of stock for cancellation by the corporation. This conveyance is without any consideration. The transfer by the liquidating corporation of its remaining assets to its stockholders is not considered as a sale of these assets. Thus, a liquidating corporation does not realize gain or loss in partial or complete liquidation. ( W.P. Fox & Sons, Inc., Petitioner, vs. Commissioner of Internal Revenue, Respondent, 15 BTA 115; Jordan Petroleum Company, 13 AFTR 2d 1692 [227 F. Supp. 174]; J.T.S. Brown & Son Company vs. Commissioner of Internal Revenue, 10 TC 840 ) "Considering that the transfer in liquidation of land and building by Owl for the surrender and cancellation of the shares is not a sale, your opinion, therefore, that the said transaction is not likewise subject to the 5% creditable withholding tax under Revenue Regulations No. 1-90, is hereby confirmed." SUCH BEING THE CASE, since the above-cited case is in all fours similar to the case at bar, this Office hereby confirms your opinion that the transfer in liquidation of the above-mentioned parcel of land by CCRHI to its sole stockholder, BPI Group of Companies Retirement Plan, is not subject to capital gains tax, creditable withholding tax and the corresponding documentary stamp tax. 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.) MILAGROS V. REGALADO Assistant Commissioner Legal Service