BIR Ruling [DA-657-04]

December 22, 2004 BIR RULING [DA-657-04] DA 222-00 24 (D) (1); 196 BF Homes Incorporated Las Pias Executive Center 1015 Tropical Avenue BF Homes, Las Pias City Attention: Ms. Mary Lou A. Vasquez Vice President Gentlemen : This refers to your letter dated December 21, 2004 stating that BF Homes, Inc. (the Trustor) is a corporation duly organized and existing under the laws of the Philippines with principal office address at 1015 Executive Center, Tropical Avenue, Las Pias City; that it is the owner of several real properties covered by TCT Nos. T-986-A, T-703-A, T-7936, T-7952, T-7951, T-4264-A, 87287 and 87288; that on the other hand, BF General Insurance Company, Inc. (Trustee) is a corporation duly organized and existing under the laws of the Philippines with principal office address at the 4th Floor, BF Condominium Building, A. Soriano Street, Intramuros, Manila; that Filipino Vastland Company, Inc. (Beneficiary), is a domestic corporation with office address at the 1015 Executive Center, Tropical Avenue, Las Pias City; that on instruction of the Trustor, the Trustee shall enter into an agreement with the Beneficiary to allow the latter to utilize the above-mentioned properties of the Trustor to secure the loan of the Beneficiary with Banco Filipino; and that a Declaration of Trust was executed by the above-named parties whereby the agreement shall be placed in the name of the Trustee for, the convenience of the Principal, the intent being that the Trustee shall hold the properties for the benefit of and in trust for the Trustor which is the true and beneficial owner thereof. Based on the foregoing representations, you now request for confirmation of your opinion that "1. The transfer of title over the above-mentioned properties, without consideration, by the Trustor in favor of the Trustee, 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 properties by the Trustor in favor of the Trustee shall not be subject to 10% value-added tax (VAT) because the said properties are not held by Trustor primarily for sale to customers or for lease in the ordinary course of its business; "3. The transfer of title over the properties, without consideration, by the Trustor in favor of the Trustee 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 properties by the Trustor in favor of the Trustee 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 titles over the properties by BF Homes, Inc., as Trustor, to BF General Insurance Company, Inc., as Trustee, 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 BF General Insurance Company, Inc. ( DA222-00 dated April 27, 2000 ) 2. The transfer of titles over the properties to BF General Insurance Company, Inc., as Trustee, is likewise not subject to the 10% value-added tax because the said properties are not held primarily for sale to customers or for lease in the ordinary course of business. 3. The transfer of the properties to BF General Insurance Company, Inc. 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 BF General Insurance Company, Inc., as Trustee, and BF Homes, Inc., as Trustor, whereby the latter will convey to the former the above-mentioned properties 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 P 15.00 under Section 188 of the said Code. aCHDAE 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