BIR Ruling [DA-452-99]

August 10, 1999 BIR RULING [DA-452-99] Malibay Estate Portion Association, Inc. Geronimo Street, Malibay Pasay City Attention: Mr . Amador R . Taroy President Gentlemen : This refers to your letter dated September 8, 1998 requesting for a ruling that no gain or loss is recognized on the transfer/subdivision and awarding of several parcels of land in the name of Malibay Estate Portion Association, Inc. under the Community Mortgage Program (CMP) being administered by the National Home Mortgage Finance Corporation (NHMFC), originated by the Center for Community Assistance and Development, Inc. to the concerned member-beneficiaries, who are underprivileged and homeless, pursuant to the provisions of R.A. No. 7279, and therefore, exempt from the corporate income tax, and from the creditable withholding tax imposed under Revenue Regulations No. 2-98. LexLib It is represented that the Malibay Estate Portion Association, Inc. is a non-stock, non-profit corporation duly registered with the Securities and Exchange Commission (SEC); that serving as a facilitator, and through the CMP Program of the government, it acquired by virtue of a loan from the NHMFC, parcels of land covered by TCT Nos. 92363 and 92364 of the Registry of Deeds for Pasay City; and that it has subdivided the said properties into homelots and distributed the homelots to its member-beneficiaries. In reply, please be informed that the transfer in favor of its individual member-beneficiaries of the said subdivided property is not subject to either capital gains tax imposed under Section 24(D)(1) of the Tax Code of 1997, or the creditable withholding tax imposed under Revenue Regulations No. 2-98, implementing Section 57 of the same Code, considering that the said transfer of its property is without any consideration since it is merely a formality to finally effect transfer of the said property to its member-beneficiaries who actually bought the same from the previous owner of the said properties through its association. In other words, the transfer is without any consideration because you are in fact transferring the ownership of the property which actually belongs to the member-beneficiaries. Furthermore, the said transfer is not subject to the donor's tax imposed under Section 98 of the Tax Code of 1997, since there is no donative intent or intention on its part to donate the said property to its member-beneficiaries, considering that it could not donate property the ownership of which belongs to the donees (member-beneficiaries) themselves. However, it is noted that under Section 196 of the Tax Code of 1997, the deeds or documents subject to the documentary stamp tax imposed therein are those where the realty sold shall be granted, assigned, transferred or otherwise conveyed to a purchaser or purchasers or to any other person or persons designated by such purchaser or purchasers, thereby excluding from its purview the instant case considering that no consideration is involved in said transaction upon which the tax imposed could be based. Accordingly, the transfer of titles of the said properties in favor of its member-beneficiaries is not subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. However, the notarial acknowledgment to said deed of conveyance is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the Tax Code of 1997. (BIR Ruling Nos. 398-93 dated October 11, 1993; DA068-99 dated February 05, 1999). 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 & Enforcement Group)