BIR Ruling [DA-436-06]

July 19, 2006 BIR RULING [DA-436-06] 24 (C), 188; DA-105-2000 A.D. Naval Law Office 33 Rep. Ignacio St., Daanghari Navotas, Metro Manila Attention: Atty. Amor Mia J. Francisco Gentlemen : This refers to your letter dated June 27, 2006 requesting on behalf of your clients, Purificacion Nepomuceno, Roberto N. Del Rosario, Emiliano Oripaypay, Ma. Christina Lee B. Del Rosario, Paul Gerard B. Del Rosario and Robert Raymond B. Del Rosario for a ruling that the transfer of their shares in Seawind Realty and Development, Inc. as trustees of Purificacion Nepomuceno (Trustor Nepomuceno) in favor of the beneficial owner thereof is not subject to income tax, capital gains tax, and documentary stamp tax. CHDaAE Documents submitted show that Seawind Realty and. Development, Inc. (Seawind or brevity) is a corporation duly organized and existing under and by virtue of Philippine laws. On the dates specified below, the following have subscribed and/or purchased the following shares in Seawind: 1. Sometime in May 2004, Roberto N. Del Rosario subscribed to five hundred seventy six (576) shares of stock of Seawind for and in behalf of Trustor Nepomuceno. Subsequently, Roberto N. Del Rosario subscribed to One Thousand Seven Hundred Twenty Four (1,724) shares of stock of Seawind for and in behalf of Trustor Nepomuceno. In a Declaration of Trust dated January 14, 1998, Roberto N. Del Rosario acknowledged that his subscription to the 576 and 1,724 shares of stock of Seawind under his name was purchased and paid for from money belonging to Trustor Nepomuceno. In the same document, Roberto N. Del Rosario also acknowledged the right and interest of Trustor Nepomuceno over the said 576 and 1,724 shares of stock as beneficial owner thereof. On November 15, 2002, upon authorization and instruction of Trustor Nepomuceno, Roberto N. Del Rosario transferred One Thousand One Hundred Forty Nine (1,149) and One Thousand One Hundred Fifty (1,150) shares of stock, respectively, to Ma. Christina Lee B. Del Rosario and Paul Gerard B. Del Rosario, respectively, thus leaving one (1) share of stock under his name. In a Declaration of Trust dated November 16, 2002, Roberto N. Del Rosario confirmed that his subscription to the said 1 share was executed and payments were made by him in behalf of and in trust for Trust or Nepomuceno, who is the real and beneficial subscriber to the said share of stock. 2. On May 23, 1994 and February 18, 1998, respectively, Emiliano Oripaypay ("Oripaypay") subscribed to Twelve (12) and Thirty Eight (38) shares of stock of Seawind for and in behalf of Trustor Nepomuceno. In a Declaration of Trust dated February 19, 1998, Oripaypay acknowledged that the Seawind shares registered in his name were purchased and paid for from money belonging to Trustor Nepomuceno. In the same document, Oripaypay also acknowledged the right and interest of Trustor Nepomuceno over the Seawind shares as beneficial owner thereof. 3. On November 15, 2002, Ma. Christina Lee B. Del Rosario acquired One Thousand One Hundred Forty Nine (1,149) shares of stock of Seawind for and in behalf of Trustor Nepomuceno. In a Declaration of Trust dated November 16, 2002, Ma. Christina Lee B. Del Rosario acknowledged that the Seawind shares registered in her name were purchased and paid for from money belonging to Trustor Nepomuceno. In the same document, Ma. Christina Lee B. Del Rosario also acknowledged the right and interest of Trustor Nepomuceno over the Seawind shares as beneficial owner thereof. 4. On November 15, 2002, Paul Gerard B. Del Rosario acquired One Thousand One Hundred Fifty (1,150) shares of stock of Seawind for and in behalf of Trustor Nepomuceno. Subsequently, on March 10, 2006, Paul Gerard B. Del Rosario acquired Six Hundred Forty Two (642) shares in Seawind also for and in behalf of Trustor Nepomuceno. In two (2) deeds of Declaration of Trust dated November 16, 2002 and March 11, 2006, Paul Gerard B. Del Rosario acknowledged that the Seawind shares registered in his name were purchased and paid for from money belonging to Trustor Nepomuceno. In the same document, Paul Gerard B. Del Rosario also acknowledged the right and interest of Trustor Nepomuceno over the Seawind shares as beneficial owner thereof. 5. On March 10, 2006, Robert Raymond B. Del Rosario acquired One Thousand Two Hundred Sixty Seven (1,267) and Six Hundred Forty One (641) shares of stock of Seawind for and in behalf of Trustor Nepomuceno. In separate Deeds of Declaration of Trust dated March 11, 2006, Robert Raymond B. Del Rosario acknowledged that the Seawind shares registered in his name were purchased and paid for from money belonging to Trustor Nepomuceno. In the same document, Robert Raymond B. Del Rosario also acknowledged the right and interest of Trustor Nepomuceno over the Seawind shares as beneficial owner thereof. Pursuant to several Deeds of Assignment and on the basis of the duly executed Declaration of Trust, Trustor Nepomuceno instructed Roberto N. Del Rosario, Oripaypay, Ma. Christina Lee B. Del Rosario to cause the transfer of their Seawind shares in her name in the Stock and Transfer Book of Seawind. On the other hand, by virtue of two (2) Deeds of Assignment and again on the basis of the Declaration of Trust, Trustor Nepomuceno instructed Paul Gerard B. Del Rosario to cause the transfer of the Seawind shares under her name and under the name of her trustee as follows: a) to Trustor Nepomuceno: 1,742 shares; and b) to Teofila F. Cruz: 50 shares. Pursuant to the Deeds of Assignment and by virtue of the Declaration of Trust, Trustor Nepomuceno instructed Robert Raymond R. Del Rosario to cause the transfer of the Seawind shares under her name and the names of her trustees as follows: a) to Trustor Nepomuceno: 1,858 shares; b) to Antonio Lorenzo: 25 shares; and. c) to Martin Leonardo Caculitan: 25 shares. In reply, please be informed that since the transfer of shares by Roberto N. Del Rosario, Emiliano B. Oripaypay and Ma. Christina Lee B. Del Rosario in favor of Trustor Nepomuceno is without monetary consideration and is merely confirmation of title in favor of the beneficial owner, the same is not subject to the capital gains tax imposed under Section 24(C) of the Tax Code of 1997. The assignment by Paul Gerard B. Del Rosario and Robert Raymond B. Del Rosario of the shares held in trust for Trustor Nepomuceno to Teofila F. Cruz, Antonio Lorenzo and Martin Leonardo Caculitan, who are likewise trustees of Trustor Nepomuceno, is not subject to the capital gains tax imposed under Section 24 (C) of the Tax Code of 1997. Likewise, the conveyance of realties to trustees or other persons without consideration is not taxable under Section 185 of the Revised Documentary Stamp Tax Regulations. Thus, the Deeds of Assignment executed by the Trustees to the Trustor which were made without monetary consideration are not subject to the documentary stamp tax imposed under Section 196 of the 1997 Tax Code, as amended. However, the notarial acknowledgement to said deeds is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the Tax Code of 1997. CASIEa This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered as null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service