Naval Caculitan Ragunjan Law Offices

December 21, 2009 BIR RULING [DA-(C-329) 802-09] 24 (D) (1), 196, 98, 105; DA-(I-024) 257-08; DA-690-2007; DA-158-2007; DA-138-07; DA-407-06 Naval Caculitan Ragunjan Law Offices Unit 837 City and Land Megaplaza ADB Ave. cor. Garnet Rd. Ortigas Center, Pasig City Attention: Atty. Amor Mia F. Naval Gentlemen : This refers to your letter dated June 5, 2009 requesting on behalf of your client, Trans-Pacific Journey Fishing Corp. (TPJ) for a confirmation of opinion that the conveyance from the trustee, TPJ, in favor of the beneficial owner, Mr. John Reynald M. Tiangco, without monetary consideration, of a parcel of land located at Columbia, Greenhills, San Juan and covered by Transfer Certificate of Title (TCT) No. 8989-R, as well as the improvement existing thereon, is not subject to capital gains, documentary stamp, and donor's taxes, the transfer being a mere formality of restoring the title to the true and beneficial owner. DCSETa It appears that TPJ is a corporation duly registered and existing under Philippine laws. It is primarily engaged in the business of commercial fishing operations, local and international. Mr. John Reynald M. Tiangco, one of its directors, had entered into a trust agreement with TPJ sometime in 2000 covering a portion of the subject property with the former as the trustor/beneficiary. As stated in the Declaration of Trust, the trustee, TPJ, acknowledges that the payments relative to the purchase of the said property were actually made by Mr. Tiangco, the trustor, who is the real and the beneficial owner of TPJ's ideal share in the Property. TPJ agreed to transfer to Mr. Tiangco the property at any time after the latter gets married. Mr. Tiangco thereafter got married to Ms. Barbara Jocelyn Pardo on April 29, 2006 and eventually upon the request of the former, TPJ had executed a Deed of Conveyance of the Property in favor of Mr. Tiangco without any monetary consideration. Moreover, all expenses pertaining to the construction and maintenance of the house built on the above-stated property ( i.e. , real estate taxes, utilities, caretaker) were paid for by Mr. Tiangco. In reply thereto, please be informed that your opinion is hereby confirmed as follows: The transfer of title of the aforestated properties by the Trustee in favor of the Beneficiary, who is the beneficial owner thereof is not subject to capital gains tax imposed under Sec. 24 (D) (1) of the Tax Code of 1997 nor to the creditable withholding tax prescribed in RR 2-98, as amended, considering that the conveyance is not motivated by a valuable consideration and merely acknowledges, confirms and consolidates the legal title and beneficial ownership over the properties in the name of Mr. Tiangco, the Trustor. The transfer of the properties to Mr. Tiangco is not likewise subject to the 12% VAT because the said properties are not held primarily for sale to customers or for lease in the ordinary course of trade or business. The conveyance of the said properties to Mr. Tiangco without any monetary consideration is not subject to gift tax imposed under Sec. 98 of the 1997 Tax Code, since there is no donative intent on the part of the trustee. (BIR Ruling No. DA-138-07 dated March 6, 2007) The Deed of Conveyance was in effect, executed to terminate the trust relationship between TPJ and Mr. Tiangco and the consolidation of the legal title and beneficial ownership over the subject properties is a conveyance without monetary consideration, and as such not subject to the documentary stamp tax imposed under Sec. 196 of the Tax Code of 1997, as amended. However, the notarial acknowledgment to such deed is subject to the documentary stamp tax of P15.00 under Sec. 188 of the same Tax Code. 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. ASaTCE Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service