Ramos and Estenzo Ramos Law Offices

September 26, 2008 BIR RULING [DA-(DT-010) 264-08] Title III, Chapter 2; DA-039-90 Ramos and Estenzo Ramos Law Offices 2/F Socorro Estenzo Building, Pres. M. L. Quezon Street Cabancalan, Mandaue City Attention: Dante T. Ramos Legal Counsel Gentlemen : This refers to your letter dated June 13, 2008 requesting on behalf of your client, Mr. Generoso Martin R. Alfaro, a ruling as to whether or not revocation of his donation is subject to tax. TEDAHI The facts of the case are as follows: 1. On June 30, 2005, Mr. Generoso Martin R. Alfaro ("Donor") executed a Donation Inter Vivos conveying to the donee, Maria Asuncion Alfaro-Benlot ("Donee") a parcel of land consisting of an area of 235 square meters out of the 435 square meters of the total area of the real property identified as Lot 31, Block 2, located in Nasipit, Cebu City, registered in the name of the Donor covered by Transfer Certificate of Title No. 139467. The donor's tax due on said donation was paid on July 28, 2005 and a corresponding Certificate Authorizing Registration (CAR) was issued by the BIR Revenue District Office No. 81, Cebu City North, on August 5, 2005. 2. On January 3, 2006, the Donor executed another Donation Inter Vivos conveying to the Donee the Donor's remaining 200 square meters portion of the Property, thereby consolidating full ownership of the property in the name of the Donee. The donor's tax due on said donation was paid on January 23, 2006 and a corresponding Certificate Authorizing Registration (CAR) was issued by the BIR Revenue District Office No. 81, Cebu City North, on February 6, 2006. 3. The Donor executed the aforesaid Donation Inter Vivos because at the time he thought he would have no further need for the property as he was determined to shortly leave the Philippines permanently to set up his own business abroad. 4. On the basis of the two deeds of donation, the Registry of Deeds for Cebu City issued a new Transfer Certificate of Title No. T-180824 covering the entire property in the name of the Donee. 5. Due to some reasons beyond the Donor's control, he subsequently had to abandon his plan to set up a business abroad. The Donor and the Donee thus mutually agreed to revoke the two Donations Inter Vivos in order to revert ownership over the property to the Donor so that the latter may instead use the same as his own residential property. CSIDEc 6. Thus, on May 14, 2008, the Donor and the Donee executed a Deed of Revocation of Donation under which, by mutual agreement, they revoked, nullified and set aside the previous donations made by the Donor of the Property to the Donee and the same relinquished and renounced any and all rights over the property in order to revest full title and ownership over the same to the Donor. 7. The Donor presented Deed of Revocation of Donation to Revenue District Office (RDO) No. 81, Cebu City North, for the purpose of payment of the documentary stamp tax due thereon and to secure a CAR to register the document with the Registry of Deeds. The Donor was informed thereat, that the CAR would not issue unless a donor's tax is paid on the Deed of Revocation of Donation. RDO 81 thus took the position that the Deed of Revocation must be treated as taxable donation of the property by the Donee back to the Donor, since the revocation was not premised on any legal grounds for revocation of a donation under the Civil Code. In reply, please be informed that Title III, Chapter 2 of the Tax Code of 1997, as amended, does not impose any tax on revocation of donation. Accordingly, the Deed of Revocation of Donation executed by and between Mr. Generoso Martin R. Alfaro and Maria Asuncion Alfaro-Benlot on May 14, 2008 is not subject to tax imposed under Title III, Chapter 2 of the Tax Code of 1997, as amended. However, the said deed is subject to the documentary stamp tax imposed under Section 188 of the Tax Code 1997, as amended. 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