BIR Ruling [DA-453-03]

December 5, 2003 BIR RULING [DA-453-03] 27 (D); DA-124-2001; DA-173-2002 Land Bank of the Philippines Land Bank Plaza 1598 M.H. del Pilar cor. Dr. J. Quintos Streets Malate, Manila Attention: Mr. Peter Eymard S. Tamayo Acting Head Gentlemen : This refers to your letter dated August 5, 2003 requesting for a ruling that, in effect, will authorize the release and/or issuance of Certificate Authorizing Registration arising from the execution of an Agreement for Dacion en Pago between Uniwide Holdings, Inc. ("UHI" for brevity) and Land Bank of the Philippines ("LBP" for brevity). It is represented that UHI is the owner of two parcels of land located at Manggahan, Pasig City covered by TCT Nos. PT-100562 and PT-100563; that said properties are being conveyed to LBP as partial settlement of UHI's obligations for a consideration of One Hundred Fifty Four Million One Hundred Eighteen Thousand Four Hundred Pesos (P154,118,400.00); that based on the Revised Indicative Term Sheet submitted to the Securities and Exchange Commission (SEC), the dacion value indicated was P192,648,000.00; that the Term Sheet however included a phrase "subject to reconciliation and SEC approval"; that based on the negotiations between UHI and LBP which was eventually approved by the SEC, the dacion value was reduced by about 20% which is the standard policy of LBP; that the approved dacion value/consideration of the aforesaid parcels of land amounted to P154,118,400.00; and that LBP has already paid the appropriate taxes based on the dacion value of P154,118,400.00. In reply, please be informed that in dacion en pago transaction, the correct basis for the computation of the capital gains tax or creditable withholding tax is the gross transfer value or Fair Market Value as determined under Section 6(E) of the Tax Code of 1997, whichever is higher. ( BIR Ruling No. DA-124-2001 dated July 18, 2001 ) Such being the case, and since the dacion value of the aforesaid parcels of land is P154,118,400.00, which is higher than its zonal value of P101,560,000.00, this Office is of the opinion that the payment of the creditable withholding tax and documentary stamp tax based on the dacion value made by LBP is proper. This ruling all serve as authority for the Revenue District Officer, Revenue District No. 43, Pasig, to issue the corresponding Tax Clearance Certificate (TCL) or Certificate Authorizing Registration (CAR) as the case may be, in favor of Land Bank of the Philippines. acCETD Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group