BIR Ruling [DA-414-98]

September 10, 1998 BIR RULING [DA-414-98] Mr. Jesus M. Encisa 17 Malihim St., Sikatuna Village Quezon City S i r : This refers to your letter dated April 30, 1998 in effect, requesting exemption from the payment of capital gains tax on the transfer of property registered in the name of Eadriex Pharmaceuticals to your name. cdt Documents submitted show that Eadriex Pharmaceuticals is duly registered with the Department of Trade and Industry under Certificate of Registration No. 0027341 with business address at 101 Vicar Building, Denver St., Cubao, Quezon City; that it is likewise licensed to operate as a drug trader by the Bureau of Food and Drugs and registered with RDO No. 30A, South Quezon City, as a VAT taxpayer; that Eadriex Pharmaceuticals is the registered owner of a parcel of land covered by TCT No. 51691 of the Registry of Deeds of Quezon City and which is also your residence; and that you intend to transfer the ownership of said property (house and lot) into your name without any monetary consideration. In reply, please be informed that the aforementioned documents clearly show that Eadriex Pharmaceuticals is a single proprietorship owned by you. As such, it does not have a legal personality of its own from its owner; it cannot be sued by itself, but it shall be the proprietor or owner who has the legal personality. (Yao Ka Sia Trading vs. CA, 209 SCRA 763) In short, the ownership of the land in question, although registered in the name of Eadriex Pharmaceuticals, actually belongs to you being the sole proprietor thereof. Accordingly, the transfer of the said parcel of land in your name is not subject to either the capital gains tax imposed under Section 24(D) of the Tax Code of 1997, or to the expanded withholding tax imposed under Revenue Regulations No. 2-98 considering that such transfer is a mere formality to finally effect transfer of title of said property to your name because it was you who actually bought the same. In short, said transaction is not a taxable transfer within the contemplation of the law considering that the transferor and transferee of the subject property pertains to one and the same person. The transfer is also not subject to the donor's tax imposed under Section 99 of the Tax Code of 1997, since there is no intention to donate the said property to you considering that Eadriex Pharmaceuticals could not donate said property the ownership of which also belongs to you. Moreover, Section 185 of the Revised Documentary Stamp Tax Regulations (Regulations No. 26) provides that "conveyances of realty not in connection with a sale, to trustees or other persons without consideration are not taxable". However, the notarial acknowledgment to whatever deed of conveyance to be executed to effect the transfer in your name is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the Tax Code of 1997. (BIR Ruling No. 398-93 dated October 11, 1993) 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 void. aisadc Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)