BIR Ruling [DA-450-98]

October 6, 1998 BIR RULING [DA-450-98] Bangko Sentral ng Pilipinas Complex A. Mabini St. corner P. Ocampo St., Malate Manila Attention: Armando L . Suratos Deputy Governor and General Counsel Gentlemen : This refers to your letters dated May 26, 1998 and June 8, 1998 requesting information concerning the possible tax consequences of the conveyance of certain real properties from the former Central Bank of the Philippines (CBP), through the CBP Board of Liquidators (CB-BOL), to the Bangko-Sentral ng Pilipinas (BSP). It is stated that by virtue of Republic Act No. 7653 (charter of the BSP), otherwise known as the "New Central Bank Act", a committee (comprised of three (3) members of the Monetary Board representing the Governor of the Bangko Sentral ng Pilipinas, the Secretary of Finance and the Secretary of Budget and Management, representing the National Government, and the Chairmen of the Committees on Banks of the Senate and the House of the Representatives) was formed to determine the assets and liabilities of CBP which may be transferred or assumed by the BSP; that the old Central Bank shall continue to exist as the "CB Board of Liquidators (CB-BOL) for the purpose of liquidation but not later than 25 years or until such time that the liabilities have been liquidated; that on November 3, 1993, the Committee came out with its report which, among others, provided for a list of real properties to be transferred to the BSP, which report was approved by the President of the Philippines in Administrative Order No. 100 dated November 30, 1993; that these real properties are identified as follows: TCT/TAX DESCRIPTION DEC./PRES. AREA PROCLAMATION (in sq. m.) REMARKS NO. 1. Bangko Sentral ng Pilipinas Main Complex Roxas Boulevard Manila 105097 67,930.50 With improvements 2. Phil. International Convention Central Center (PICC) CCP Complex Pasay 21054 104,717 With improvements 3. BSP Motorpool P. Casal St., Quiapo, Manila 146583 5,977.70 With improvements 4. Allied Warehouse Sta. Lucia St., Intramuros, Manila 154661 3,658.601 With improvements 5. BSRO La Union Poblacion, San Fernando, La Union 0-2072 12,512 With 0-2073 improvements 6. BSRU Angeles Bo. Sto. Rosario, Angeles City 56523 1,314 With improvements 7. BSRU Cabanatuan Poblacion, Cabanatuan City T-42390 2,237 With improvements 8. BSRU Legaspi Cabangan Legaspi City 25267 6,700 None 9. BSRU Lucena Poblacion Lucena City T-38717 3,425 None 10. Nivel Hills Cebu City 81093 37,350 None 11. BSRO Cebu (former PNB) 118748 14,000 With improvements 12. BSRU Iloilo (former SIHI) City Proper, Iloilo City T-79558 841 With improvements 13. BSRU Iloilo (Pres. Proc.) City Tax Dec. Nos. 18,993 None Proper Iloilo City 95-14704-01 14. BSRU Bacolod (Former SIHI) T-147762 1,029.75 With Poblacion, Bacolod City improvements 15. BSRO Davao T-43355 22,410 With Davao City T-65490 improvements T-65491 16. BSRU Cagayan de Oro Poblacion, Cagayan de Oro T-18492 7,100 None 17. BSRU Butuan Poblacion, Butuan City T-5933 2,000 None 18. Security Plant Complex East Avenue, Quezon City 263222 57,319 With improvements 19. Security Plant Complex (Annex) East Avenue, Quezon City 285745 40,000 None 285746 20. Petit Barracks Military Reservation Pres. Proclamation No. Vacant Zamboanga City 2140 and Tax Declaration No. 0010401293 It is further represented that in the implementation of R.A. No. 7653, the Committee Report and Administrative Order No. 100, the CB-BOL executed in favor of the BSP the corresponding deeds of conveyances over those real properties listed in Annex "A" of your letter; that the BSP is now in the process of registering the said deeds of conveyances for the purpose of procuring the necessary titles of the said properties in favor of the BSP; and that one of the requisites for the transfer of said properties is a tax clearance from this Office. Based on the foregoing, you are requesting for a ruling as to whether or not the BSP is exempt from the payment of capital gains tax, documentary stamp tax and other pertinent national taxes relative to the aforesaid conveyance of real properties in its favor. In reply, please be informed that since the conveyance of those real properties by the CB-BOL to the BSP is without any consideration and effected by operations of law, the evident purpose of which is the transfer of the beneficial ownership over those properties to the BSP to enable it to perform its responsibilities and operate on a viable basis as contemplated under Section 132 (c) of R.A. No. 7653, there is no taxable sale or transfer of properties contemplated under Section 27(D)(5) of the Tax Code of 1997, hence the same is not subject to capital gains tax imposed therein. Moreover, under Section 185 of Revenue Regulations No. 2 otherwise known as the "Revised DST Regulations", conveyances of real properties not in connection with sale to persons and without consideration are not subject to the documentary stamp tax under Section 196 of the Tax Code of 1997. However, the notarial acknowledgment to the deeds of conveyances executed by the CB-BOL shall be subject to the documentary stamp tax on certificates under Section 188 of the same Code. aisadc 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.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)