Manabat Delgado Amper & Co.

November 4, 2009 BIR RULING [DA-(C-251) 645-09] 27; 57 (B); 188; #550-93; DA-164-98; DA-184-2001; DA-510-2005 Manabat Delgado Amper & Co. 5th Floor, Salamin Building 197 Salcedo Street, Legaspi Village 1229 Makati City Attention: Attys. Richard R. Lapres and Walter L. Abela, Jr. Gentlemen : This refers to your letter dated June 26, 2009 requesting on behalf of your client, Asian Hospital, Inc. (the "Company" for brevity) for confirmation of your opinion that the conveyance of the parcel of land to be made by the Company to Asian Hospital and Medical Center Condominium Corporation ("AHMC-CC") is exempt from the capital gains tax/creditable withholding tax and documentary stamp tax. cAIDEa Background The Company is a corporation duly organized and existing under Philippine laws, with principal office address at 2205 Civic Drive, Filinvest Corporate City, Alabang, Muntinlupa City. It is engaged in the establishment, maintenance, operation, ownership and management of hospitals, medical and other related health care facilities and business, including pharmacies, diagnostic centers, ambulatory clinics, medical laboratories, scientific research and educational institutions and other allied undertakings and services. Health Care Properties, Inc. (HCPI) was a domestic corporation engaged in the ownership, use, improvement, development, subdivision, sale, exchange, lease, and holding for investment or otherwise of real estate of all kinds, including buildings, houses, apartments and other structures. In the year 2000, HCPI launched the Asian Hospital Medical Center Condominium Project to sell condominium units to various owners. The said Condominium Project is situated on a parcel of land with an area of Four Thousand Two Hundred and Thirty Six (4,236) square meters located at Alabang, Muntinlupa City, and was registered in the Registry of Deeds of Muntinlupa under HCPI as evidenced by Transfer Certificate of Title (TCT) No. 3449. On March 15, 2002, AHMC-CC was formed pursuant to Section 9 of the Condominium Act. The primary purpose of this non-stock condominium corporation is to manage, administer, maintain, and preserve in good and habitable conditions, the Asian Hospital Medical Center Condominium Project, as well as, to promote the welfare and safety of all the occupants therein. Pursuant to the Deed of Absolute Sale that was entered into by each condominium unit owner, the owner will automatically become a member of AHMC-CC, which makes him liable for all assessments and charges of AHMC-CC. Such assessments and charges shall cover among others, expenses for the maintenance and upkeep of the common areas including janitorial and security services, administrative expenses, administration personnel, realty taxes and insurance of the building. However, only the respective condominium and parking rights were transferred to the owners under their individual Condominium Certificate of Title (or "CCT's"). The title to the parcel of land on which the Condominium project stands, remain with HCPI. On March 8, 2007 the Board of Directors of the Company and HCPI, has approved the Plan of Merger between their companies, and was ratified by their respective stockholder's on April 25, 2007. Pursuant to Article I of the Plan of Merger between the Company and HCPI, the former, as the surviving corporation shall retain all the purposes and powers of the company and obtain all the rights and privileges, immunities and franchises of HCPI to the extent allowed by law and by existing regulations. The company shall, thereupon and thereafter, possess all the rights, privileges, immunities and franchises of HCPI; and all property, real or personal, all receivables due on whatever account, and all and every other interest of, belonging to, or due to HCPI appearing on the audited financial statements of HCPI as of and for the year ended March 31, 2007 shall be taken and deemed to be transferred to and vested in the Company without further act and deed. On September 7, 2007, the Plan of Merger between the company and HCPI was approved by the Securities and Exchange Commission. Among the properties on the audited financial statements of HCPI as of and for the year ended March 31, 2007 is the parcel of land on which the Condominium project is situated. Consequently, the aforesaid land has thus been transferred to the company by operation of law. cAaDCE On the other hand, it is AHMC-CC's primary purpose to manage, administer, maintain and preserve in good and a habitable conditions, the Asian Hospital Medical Center Condominium project, as well as, to promote the welfare and safety of all occupants therein. For this reason, the company through the execution of a Deed of Conveyance will transfer the aforesaid land together with other common areas of the Condominium project to AHMC-CC. The purpose of this conveyance is to formally transfer the legal rights of the parcel of land to AHMC-CC and enable AHMC-CC to fully perform its purpose. The said conveyance will not involve any monetary consideration and is not in connection with any sale made to AHMC-CC's Condominium Project. No income or loss will be generated by and between, and among the parties, in connection with such sale. In reply, please be informed that since the conveyance of the parcel of land will be made without any monetary consideration and is not in connection with a sale made to Asian Hospital Medical Center Condominium Project, no income was generated and a fortiori, no creditable withholding tax prescribed by Revenue Regulations (RR) No. 2-98, as amended, implementing Section 57 (B) of the Tax Code of 1997 or capital gains tax under Section 27 (D) (5) of the same Code, is payable and collectible. (BIR Ruling No. DA-164-98 dated April 22, 1998) Moreover, Section 185 of the Revised Documentary Stamp Tax Regulations (Regulations No. 26)provides that "conveyances of realty not in connection with a sale to trustees or other persons without consideration are not taxable". Thus, the aforesaid conveyance is not subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997, as amended. However, the notarial acknowledgement 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, as amended. (BIR Ruling Nos. DA-184-2001 dated October 10, 2001 and DA-505-2005 dated December 16, 2005) 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.) JAMES H. ROLDAN Assistant Commissioner Legal Service