BIR Ruling No. 030-15

February 5, 2015 BIR RULING NO. 030-15 Section 196 of the Tax Code of 1997, as amended; 000-00 SM Investments Corporation 10/F OneE-Com Center, Harbor Drive, Mall of Asia Complex, Pasay City 1300 Attention: Cecilia R. Patricio Authorized Representative Gentlemen : This refers to your letter dated April 10, 2012 requesting confirmation of your opinion that the tax base of the Documentary Stamp Tax (DST) due on the Deed of Absolute Sale made and entered into by and between the Republic of the Philippines and SM Investments Corporation (SMIC) should be based on the actual consideration paid for the subject parcel of land as stipulated in the Deed of Absolute Sale. TIADCc It is represented that the Republic of the Philippines is the absolute owner of parcels of land located at Res. Sec. "A", Baguio City, and more particularly described as Lot Nos. 3, 114-A, 115, 125, 126-A, 126-B and 128 (all IR-261) and X and Y containing a total area of 34,528 square meters. A resurvey of the subject lot was conducted on October 9 to 11, 2003. After due consideration of the easement and servitudes provided for in Commonwealth Act No. 141, otherwise known as "An Act to Amend and Compile the Laws Relative to Lands of the Public Domain" and after deducting and excluding from the original area of 34,528 sq.m. the road right-of-ways of 2,834 sq.m., more particularly described as Lot Nos. X-2, Y-1, 125-B-1, 125-B, 115-A and 3-A, the remaining area available for conveyance and subject of the Deed of Absolute Sale is 31,688 sq.m., more particularly described below as Lot Nos. 3-B, 114-A, 128, 115-B, 125-A, 126-B-2, 126-A, X-1 and Y-2. Lot No. Lot No. 1. Lot 3-B 1,998 sq.m. 2. Lot 114-A 1,598 sq.m. 3. Lot 128 3,500 sq.m. 4. Lot 115-B 4,145 sq.m. 5. Lot 125-A 723 sq.m. 6. Lot 126-B-2 7,265 sq.m. 7. Lot 126-A 7,496 sq.m. 8. Lot X-1 1,770 sq.m. 9. Lot Y-2 3,193 sq.m. On April 22, 1992, SMIC was declared the highest bidder of the 34,528 square meter lots that were sold thru public bidding. SMIC won the bidding at Php69,999,995.52 for the whole tract of 34,528 square meters. On May 5, 1992, an Order Award was issued to SMIC being the highest bidder of the subject lots. AIDSTE SMIC paid the Republic of the Philippines the full amount in six (6) separate payments, to wit: O.R. No. Date Amount 4431821 4-22-1992 Php7,000,000.00 4476373 U 5-07-1993 6,299,999.55 4477639 U 4-28-1994 6,299,999.55 0711214 H 5-02-1995 6,299,999.55 0709417 H 5-02-1996 6,299,999.55 7977606 N 4-02-1997 37,799,997.32 On September 16, 2011, the President of the Republic of the Philippines, His Excellency Benigno S. Aquino III, and SMIC executed a Deed of Absolute Sale whereby the government conveyed, transferred, and ceded unto SMIC the subject lots with an aggregate area of 31,688 square meters free from claims for the consideration of Php69,999,995.52. In reply, please be informed that Section 196 of the Tax Code of 1997, as amended, states as follows: " SECTION 196. Stamp Tax on Deeds of Sale and Conveyances of Real Property. On all conveyances, deeds, instruments, or writings, other than grants, patents or original certificates of adjudication issued by the Government, whereby any land, tenement or other realty sold shall be granted, assigned, transferred or otherwise conveyed to the purchaser, or purchasers, or to any other person or persons designated by such purchaser or purchasers, there shall be collected a documentary stamp tax, at the rates herein below prescribed, based on the consideration contracted to be paid for such realty or on its fair market value determined in accordance with Section 6(E) of this Code, whichever is higher: Provided, That when one of the contracting parties is the Government, the tax herein imposed shall be based on the actual consideration. " (underscoring supplied) The above quoted provision of law clearly provides that if one of the contracting parties is the Government, the tax (DST) to be imposed shall be based on the actual consideration. Considering that the Government is one of the contracting parties in the Deed of Absolute Sale, as aptly pointed out by the Supreme Court in the case of Commissioner of Internal Revenue vs. American Express International, Inc. (Philippine Branch) , G.R. No. 152609 dated June 29, 2005, "it is basic in statutory construction that where the law is clear and unambiguous, there is no room for interpretation. There is only room for application." AaCTcI In view of the foregoing law and jurisprudence, this Office hereby confirms that tax base of the Documentary Stamp Tax (DST) due is the actual consideration paid for the subject parcel of land as stipulated in the Deed of Absolute Sale between the Republic of the Philippines and SM Investments Corporation (SMIC). 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.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue