BIR Ruling No. 051-15

February 24, 2015 BIR RULING NO. 051-15 Secs. 24 (D) (1), 98, 105, 196 of the 1997 NIRC, as amended; BIR Ruling No. 031-99; BIR Ruling No. 329-12 Manzanal Law Offices 12th Floor, Telecom Plaza Building 316 Sen. Gil Puyat Avenue, Makati City Attention: Dennis R. Manzanal Gentlemen : This refers to your letter dated October 17, 2012, requesting on behalf of your client, Spouses Carlos C. Torres and Virginia F.C. Torres (Spouses Torres), for a ruling that the conveyance of the title of the properties to the trustor from the trustee is not subject to the capital gains tax (CGT), creditable withholding tax, value added tax (VAT), gift tax and documentary stamp tax (DST). Documents submitted disclosed that on July 2, 1993, Spouses Torres entered into a Trust Agreement for the benefit of Carlos C. Torres, Virginia F.C. Torres, Ma. Teresa Torres Spicer, Carlos Bartolome Torres, Gerardo Pedro Torres and Lorenzo R.C. Torres with PDCP Development Bank by virtue of which Trust Account No. 620008 was established, whereby the Spouses Torres conveyed to PDCP Development Bank, the amount of Six Million Four Hundred Twenty Three Thousand Three Hundred Six and 76/100 Pesos (P6,423,306.76) in cash. PDCP Development Bank, was later absorbed by First e-Bank with Trust Account No. 101-02-105-0593, and the latter was again eventually absorbed by Asiatrust Bank (Asiatrust). Thus, the trust account of Spouses Torres in PDCP Development Bank was eventually transferred to Asiatrust with Trust Account No. P-TRT003-03047-2006. Pursuant to the terms of the Trust Agreement, PDCP Development Bank purchased, with the funds transferred to it in trust, real estate properties located at Brgy. Pansol, Calamba Laguna covered by Transfer Certificates of Title (TCT) Nos. 305599 and 305600 issued by the Registry of Deeds for the Calamba Branch and caused the same to be registered in the name of PDCP Development Bank Trust Account No. 62008 and when PDCP Development Bank Trust Account No. 62008 was later converted into First e-Bank Trust Account No. 101-02-105-0593, the latter trust account likewise acquired a real estate property located at Brgy. Diliman, Quezon City covered by TCT No. 237324 issued by the Registry of Deeds for Quezon City, in the name of First e-Bank Trust Account No. 101-02-105-0593. On November 11, 2009, Spouses Torres closed their Trust Account No. P-TRT003-03047-2006 with Asiatrust and on June 10, 2013, Spouses Torres and Asiatrust executed a Deed of Re-conveyance, whereby Asiatrust assigned, ceded and transferred TCT Nos. 305599, 305600 and 237324 to Spouses Torres as the beneficial owners thereof. aTEACS You now request for a confirmation of opinion that in as much as the Deed of Re-Conveyance referred to involve no real transfer of ownership by Asiatrust to Spouses Torres be declared exempt from the payment of CGT, creditable withholding tax, VAT, gift tax and DST. In reply thereto, please be informed that your opinion is hereby confirmed as follows: The transfer of title of the afore-stated property by the trustee in favor of the beneficiary, who is the beneficial owner thereof is not subject to capital gains tax imposed under Sec. 27 (D) (5) 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 Spouses Torres, the Trustor. (BIR Ruling No. 329-12 dated May 11, 2012) Furthermore, in BIR Ruling No. 031-99 dated March 19, 1999, this Office has already ruled that: ". . . the conveyance by the Trustee in favor of the Trustor of the subject properties which the former acquired by virtue of the Trust Agreement is not to be treated as another transfer separate and distinct from the sale between the original owner and the Trustee. The conveyance is merely to be treated as a continuation and confirmation of title in favor of the ultimate and real beneficiary of the subject properties." The transfer of the properties to Spouses Torres is not likewise subject to the 12% VAT because the said property is not held primarily for sale to customers or for lease in the ordinary course of trade or business. The conveyance of the property to Spouses Torres 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. The Deed of Conveyance executed to terminate the trust relationship between the successor entity and Spouses Torres and the consolidation of the legal title and beneficial ownership over the subject property is a conveyance without monetary consideration, and as such not subject to the documentary stamp tax imposed under Sec. 196 of the same Tax Code, as amended. However, the notarial acknowledgment to such deed is subject to the documentary stamp tax of P15.00 under Sec. 188 of the 1997 Tax Code. 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. IDScTE Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner Bureau of Internal Revenue