Atty. Jesus M. Sy, Jr.

August 6, 2008 BIR RULING [DA-(I-011) 117-08] 24 D (1), RR 2-98, 196, 188; DA-158-2007 Atty. Jesus M. Sy, Jr. 145 Panay Avenue Quezon City S i r : This refers to your letter dated May 27, 2008 requesting on behalf of your clients, Spouses Victor Kung Sy and Teresita Uy Sy for a ruling on the tax implication of the transfer of a 508 sq.m. lot situated at Ayala Hillside Estates, Quezon City which was previously subject of a Trust Agreement. The facts as you represented are as follows: 1. Sometime on January 8, 2008, Steven U. Sy, the Trustor executed a Trust Agreement in favor of Spouses Victor Kung Sy and Teresita Uy Sy, the Trustees, to buy the above-stated property from Francis C. Solco, the Seller, out of Steven Uy Sy's fund on condition that Trustees will manage the property and hold it as holder under equitable title. 2. On January 9, 2008, a Deed of Absolute Sale was executed between Francis C. Solco, Seller and Spouses Victor Kung Sy and Teresita Uy Sy over the subject property covered by Transfer Certificate of Title No. N-296352. 3. Simultaneous with the registration of the sale and transfer of ownership to Spouses Victor Kun Sy and Teresita Uy Sy, the Trust Agreement was likewise registered and when the new title no. N-314066 was released said title bears the annotation that a Trust Agreement over the property was executed by and between Steven Uy Sy, married to Ruth Rose Anne B. Sy as the Trustor and Spouses Victor Kung Sy and Teresita Uy Sy as Trustees per date of instrument January 8, 2008 and date of inscription March 14, 2008. AHacIS 4. That on May 19, 2008, Trustor Assignee and Trustee Assignor agree to reconvey and transfer the property originally covered by Transfer Certificate of Title (TCT) No. N-296352, now TCT No. N-314066 from trustee Assignor to Trustor Assignee the latter being the real owner of the property. In reply, please be informed that since the transfer of the aforequoted property by Spouses Victor Kung Sy and Teresita Uy Sy in favor of Steven Uy Sy is without monetary consideration and is merely a confirmation of title in favor of the true and beneficial owner thereof, the same is not subject to the capital gains tax imposed under Section 24 (D) (1) of the Tax Code of 1997 nor to the creditable withholding tax imposed under Revenue Regulations No. 2-98, as amended. Likewise, the conveyance of realties to trustees or other persons without consideration is not taxable under Section 185 of Revenue Regulations No. 26 otherwise known as the Revised Documentary Stamp Tax Regulations. Thus, the Deed of Reconveyance executed by Spouses Victor Kung Sy and Teresita Uy Sy in favor of Steven Uy Sy which is made without valuable or monetary consideration is not subject to the documentary stamp tax imposed under Section 196 of the 1997 Tax Code, as amended. However, the notarial acknowledgement to said deed is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the same Tax Code, as amended. This will authorize the Revenue District Officer (RDO) of the revenue district where the subject property is located to issue the corresponding Tax Clearance Certificate/Certificate Authorizing Registration with regard to the transfer by Spouses Victor Kung Sy and Teresita Uy Sy of the said property in favor of Steven Uy Sy without need of presentation of proof of payment of the capital gains tax/creditable withholding tax and documentary stamp tax. 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. ICTHDE Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service