Mr. Marcelius R. Lim

September 4, 2009 BIR RULING [DA-(C-192) 495-09] DA690-07; DA138-07; DA162-05; DA385-04; DA646-04; DA369-03 Mr. Marcelius R. Lim No. 80 Magsaysay Boulevard Extension Quezon City Sir : This refers to your letter dated August 4, 2009 stating that Alakor Corporation is a corporation organized and existing under the laws of the Philippines with principal office address at the 9th Floor QUAD Alpha Centrum, 125 Pioneer Street, Mandaluyong City; that on the other hand, Severina Realty Corporation is likewise a corporation organized and existing under the laws of the Philippines; that Alakor Corporation is the owner in fee simple of a parcel of land covered by TCT No. 33173 issued by the Registry of Deeds for the Province of Rizal with an aggregate area of 1,000 square meters; that Severina Realty Corporation on instruction of Alakor Corporation entered into a Deed of Absolute Sale for the acquisition of the above-mentioned property and shall hold the said property for the benefit of and in trust for Alakor Corporation; that on December 27, 2000, a Declaration of Trust was executed by Alakor Corporation, as Principal, and Severina Realty Corporation, as Trustee, whereby the Trustee confirms and acknowledges that it is merely acting as Trustee for the Principal and holds no interest or claim adverse to that of the Principal; and that the Principal shall save the Trustee free and harmless from any and all liability of whatever nature, whether for taxes or otherwise, that may arise as a result of the Trustee's holding title to the said property for an in behalf of the Principal. DIEACH Based on the foregoing representations, you now request confirmation of your opinion that 1. The transfer of a parcel of land covered by TCT No. 33173, without consideration, by the Trustee in favour of the Principal is neither subject to capital gains tax nor creditable withholding tax; 2. The transfer of the said property by the Trustee in favour of the Principal shall not be subject to the 12% value-added tax (VAT) because the said property is not held by the Trustee primarily for sale to customers or lease in the ordinary course of business, considering that it only holds the same in trust for the Principal; and 3. The transfer is likewise not subject to donor's tax. In reply thereto, please be informed that your opinion is hereby confirmed as follows 1. The transfer of title over the aforesaid property by the Trustee in favor of the Principal, the beneficial owner thereof, to be effected through a Deed of Conveyance 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 but merely acknowledges and confirms the title and ownership over the above-mentioned property of Alakor Corporation, as the Principal. (BIR Ruling No. DA222-00 dated April 27, 2000) 2. The transfer of title over the property to the Principal is likewise not subject to the 12% value-added tax because the said property is not held primarily for sale to customers or for lease in the ordinary course of business. 3. The transfer of the said property to the Principal without any monetary consideration is not subject to gift tax imposed under Section 98 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 Deed of Reconveyance executed by and between Severina Realty Corporation, as Assignor/Trustee and Alakor Corporation, as Assignee/Principal, whereby the former will convey to the latter the above-mentioned property without monetary consideration is likewise not subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997, as amended. However, the notarial acknowledgment is subject to the documentary stamp tax of P15.00 under Section 188, supra . 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.) JAMES H. ROLDAN Assistant Commissioner Legal Service