Wil-Vic Construction & Development Corporation

June 16, 2010 BIR RULING [DA-(C-024) 101-10] 24 (D) (1), 196, 188; 339-88; DA (C-002) 005-2010 Wil-Vic Construction & Development Corporation 96 V. Luna Rd. Ext., Sikatuna Quezon City Attention: Ms. Rebecca G. Genato Treasurer Gentlemen : This refers to your letter dated January 15, 2010 requesting for a ruling that the reconveyance of a real property pursuant to a Compromise Judgement is not subject to capital gains tax, creditable withholding tax and documentary stamp tax. Documents submitted shows that Spouses Felix Alfred B. Baguilat (TIN 181-223-739) and Iris V. Baguilat (TIN 170-665-243) is at present the registered owner of Unit No. 201 of Makati Terraces Condominium (Phase 1) situated at 3650 Davila St., Brgy. Tejeros, Makati City and covered by Condominium Certificate of Title (CCT) No. 88061. Spouses Baguilat and Felisa Brawner Baguilat (TIN 105-337-099), the previous owner of the subject condominium unit are the defendants in Civil Case No. 08-739 before the Regional Trial Court (RTC), National Capital Judicial Region, Branch 138, Makati City for Annulment of Sales, Title with Reconveyance and Damages filed by Mr. William O. Genato (TIN 126-467-858), President of Wil-Vic Construction & Development Corporation (TIN 001-008-927-000). The afore-named parties having undergone mediation process with the Philippine Mediation Center, submitted to the Court for consideration and approval, a compromise agreement on January 27, 2010, the terms and conditions of which are quoted as follows: "1. That the FIRST PARTY shall pay the SECOND PARTY the amount of One Million Six Hundred Fifty Thousand (P1,650,000.00) Philippine Currency in cash on 05 March 2010; 2. That the SECOND PARTY shall execute a Deed of Reconveyance in favor of Wil-Vic Construction & Development Corporation who is the originating owner of the Unit 201 of Makati Terraces Condominium situated at No. 3650 Davila St., Barangay Tejeros, Makati City (hereinafter referred to as "the Property") after the amount in the preceding paragraph has been paid in full; DTAHSI 3. That for the purpose of executing the preceding paragraphs and this settlement agreement, William O. Genato hereby warrants that he has full powers to act for, enter into, represent and bind Wil-Vic Construction & Development Corporation in this settlement agreement, fulfill the terms and conditions thereof, and to pay the SECOND PARTY in accord with the herein settlement agreement. The SECOND PARTY shall be held harmless and without liability for any violation of this provision, and shall be deemed to have entered into this compromise based on the said warranty and representation; 4. That the FIRST PARTY together with the SECOND PARTY shall go to Metropolitan Bank and Trust Company and the FIRST PARTY shall pay directly to Metrobank the full amount payable to them by the SECOND PARTY (loan, interest, release of mortgage fees and others) and pay the remaining amount to the second party; 5. That the SECOND PARTY shall execute a Deed of Assignment for Metrobank to release the Condominium Certificate of Title No. 88061 to William Genato and/or Rebecca Genato; xxx xxx xxx 11. That all fees and taxes of whatever kind and nature prescribed by law, including but not limited to documentary stamp taxes, registration fees, transfer fees, capital gains taxes, value-added taxes, corresponding real estate taxes on the property from the date of the execution of this Agreement and/or reconveyance, shall be for the account of the FIRST PARTY; 12. That this Settlement Agreement shall be made binding to the parties heirs, successor-in-interest, assigns, agents and transferees; 13. That this Agreement is given and accepted for the purpose of compromising disputed claims or avoiding expense, inconvenience, or uncertainty of any litigation. Nothing contained in this Agreement, without prejudice to and limited to the extent provided for under paragraph 3 herein, or any consideration given pursuant to this agreement, shall constitute or be deemed by any party for any other purpose as an admission of an act, position, omission, liability or damages. xxx xxx xxx WHEREFORE, finding the afore-quoted Compromise Agreement to be in order and the same not being contrary to law, morals and public policy, and it appearing that the same has been signed by the parties duly assisted by the Mediation Retired RTC Judge Lucia V. Isnani of the Philippine Mediation Center, the same is hereby APPROVED and judgment is rendered in accordance therewith." In reply thereto, please be informed that since the conveyance of the above-mentioned property is in pursuance to the Court Decision and was made without monetary consideration, the transfer of the subject property by Spouses Felix Alfred and Iris Baguilat in favor of William O. Genato is not subject to the capital gains tax imposed in 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, implementing Sec. 57 (B) of the said Code. Furthermore, the Deed of Reconveyance is likewise not subject to the documentary stamp tax (DST) imposed in Section 196 of the Tax Code of 1997 but only to the DST imposed under Section 188 of the same Tax Code, as amended. 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. SEIacA Very truly yours, (SGD.) GREGORIO V. CABANTAC Deputy Commissioner