BIR Ruling [DA-415-06]

July 4, 2006 BIR RULING [DA-415-06] BCDA DA-376-03, 027-00 Bellevue Properties, Inc. 12/F Equitable Bank Tower 8751 Paseo de Roxas, Makati City Attention : Ms. Cecilia R. Patricio VP-Corporate Tax Division Gentlemen : This refers to your letter dated June 21, 2005 requesting confirmation of your opinion that the purchase of property by Bellevue Properties, Inc. (Bellevue) from Bases Conversion and Development Authority (BCDA) is not subject to income tax, expanded withholding tax or capital gains tax. It is represented that Bellevue purchased from BCDA, a government corporation created by virtue of Republic Act (RA) No. 7227, as amended by RA No. 7917, certain parcels of land also known as Camp Bago Bantay property with an aggregate area of approximately 50,002.20 square meters located in Quezon City covered by Transfer Certificate of Title (TCT) Nos. N-138216 and N-138217, both of the Registry of Deeds of Quezon City, for a total consideration of P646,830,283.00. It is your view that the proceeds from the sale of properties owned by BCDA is exempt from all forms of taxes and fees pursuant to Sec. 8 of RA No. 7227, as amended by RA No. 7917. In reply, please be informed that Section 8 of RA No. 7227, as amended by RA No. 7917, grants the President the authority to sell, in whole or in part, that certain 50.00 hectares, more or less, covering Camp Bago Bantay, which are declared alienable and disposable pursuant to the provisions of existing laws and regulations governing sales of government properties. Furthermore, pursuant to the above provision, the proceeds of its sale shall not be diminished and, therefore, exempt from all forms of taxes and fees. In BIR Ruling No. 027-2000 dated June 28, 2000, this Office had ruled that BCDA is exempt from the creditable withholding tax imposed under Section 57(B) of the Tax Code of 1997, as implemented by Section 2.57.2(J) of Revenue Regulations (RR) No. 2-98, or from the capital gains tax under Section 27(D)(5) of the Tax Code of 1997, whichever is applicable, in relation to the proceeds of its sale of certain government properties specifically enumerated in RA No. 7227, as amended by RA No. 7917. Since Camp Bago Bantay is among those properties specifically enumerated in RA No. 7227, as amended by RA No. 7917, which are alienable and disposable, the proceeds from its sale, therefore, is exempt from capital gains tax, income tax, and consequently, from the creditable withholding tax imposed under RR No. 2-98, as amended. Likewise, BCDA is exempt from the payment of the documentary stamp tax (DST) imposed under Section 196 of the Tax Code of 1997, as amended. However, Section 173 of the same Code provides that "whenever one party to a taxable document enjoys exemption from the tax herein imposed, the other party thereto who is not exempt shall be the one directly liable for the tax." Accordingly, Bellevue is liable for the DST on the sale in its favor of a certain portion of Camp Bago Bantay by the BCDA. The DST due thereon is based on the consideration contracted to be paid for such realty or the fair market value of the property determined in accordance with Section 6(E) of the Tax Code of 1997, whichever is higher. 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, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service