BIR Ruling [DA-429-04]

August 10, 2004 BIR RULING [DA-429-04] DA 222-00 24 (D) (1); 196 Lapanday Holdings Corporation Ground Floor, Macondray Centre 2263 Pasong Tamo Extension Makati City Attention: Atty. Rosanna Lallana Burkley Corporate Legal Counsel Gentlemen : This refers to your letter dated January 26, 2004 stating that Lapanday Holdings Corporation (the Trustor) is a corporation duly organized and existing under the laws of the Philippines; that on the other hand, Grand Metro Lorenzo Corporation (Trustee) is a corporation duly organized and existing under the laws of the Philippines with principal office address at Torre Lorenzo Building, Taft Avenue, Manila; that on July 16, 2001, the Trustee upon instructions from the Trustor, purchased a parcel of land located at 2444 Taft Avenue, Malate, Manila, then owned by Philippine Baptist S.D.C., (the Baptist Property); that for this purpose, the Trustee executed a Declaration of Trust in favor of Trustor; that pursuant to said Deed, the Trustee acknowledged that it is purchasing the Baptist Property for and in behalf of the Trustor, which has previously advanced funds to the Trustee; that the Trustee also acknowledged the right and interest of the Trustor as beneficial owner of the Baptist Property; that on October 31, 2002, pursuant to the Declaration of Trust, the Trustor instructed the Trustee to cause the transfer in trustor's name of the Baptist Property, which it beneficially owns; and that said transfer which will be made pursuant to the trust established in the Declaration of Trust, shall be without consideration. Based on the foregoing representations, you now request for confirmation of your opinion that "1. The transfer of title over the Baptist Property, without consideration, by the Trustee in favor of the beneficial owner thereof, is neither subject to capital gains tax imposed under the National Internal Revenue Code nor to the creditable withholding tax imposed under Revenue Regulations No. 2-98, as amended; "2. The transfer of title over the Baptist Property by the Trustee in favor of the Trustor shall not be subject to 10% value-added tax (VAT) because the said property is not held by Trustee primarily for sale to customers or for lease in the ordinary course of its business, considering that it only holds the same in trust for the Trustor; "3. The transfer of title over the Baptist Property, without consideration, by the Trustee in favor of the Trustor shall not be subject to donor's tax imposed under Section 98 of the NIRC due to lack of donative intent on the part of the Trustee; and "4. The transfer of title over the Baptist Property by the Trustee in favor of the Trustor shall not be subject to documentary stamp tax imposed under Section 196 of the NIRC." In reply thereto, please be informed that your opinion is hereby confirmed as follows: 1. The transfer of title over the Baptist Property by Grand Metro Lorenzo Corporation, as Trustee, to Lapanday Holdings Corporation, as Trustor, to be effected through a Declaration of Trust 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 above-mentioned property of Lapanday Holdings Corporation. ( DA222-00 dated April 27, 2000 ) 2. The transfer of title over the Baptist Property to Lapanday Holdings Corporation, as Trustor, is likewise not subject to the 10% value-added tax because the said property is not held primarily for sale to customers or for lease in the ordinary course of business. ESIcaC 3. The transfer of the Baptist Property to Lapanday Holdings Corporation without any monetary consideration is not subject to gift's 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 ) 4. Finally, the Declaration of Trust executed by and between Metro Grand Lorenzo Corporation, as Trustee, and Lapanday Holdings Corporation, as Trustor, whereby the former will convey to the latter the Baptist Property 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.) MILAGROS V. REGALADO Assistant Commissioner Legal Service