When is the Documentary Stamp Tax Payable -Upon Execution of the Absolute Deed of Assignment (Contract to Sell) or Upon Execution of the Deed of Absolute Sale?

September 9, 1996 BIR RULING NO. 097-96 196 000-00 97-96 New Inter-Pacific Development Corporation 8/F, 8741 Citibank Center Paseo de Roxas Makati City Attention: Mr . Ricardo Ong Vice-Pres . Finance Gentlemen : This refers to your letter dated August 21, 1996 stating that the New Inter-Pacific Development Corporation is a domestic corporation engaged in the real estate business doing low-cost/socialized housing projects; that upon purchase by your client/customer of a house and lot package, an Absolute Deed of Assignment is executed by and between your client, your company and The Home Development Mutual Fund (Pag-IBIG) which is in the nature of a Contract to Sell; that the said Absolute Deed of Assignment does not vest title upon the vendee but contains certain provisions for the giving of a deed in the future upon compliance with certain conditions, like completion of payment of the purchase price; and that upon full payment thereof, a Deed of Absolute Sale is then executed between the parties. Based on the foregoing, you now request for a ruling as to when the documentary stamp tax is payable. Will it be upon execution of the Absolute Deed of Assignment (Contract to Sell) or upon execution of the Deed of Absolute Sale? In reply please be informed that under Section 163 of Regulations No. 26, or Revised Documentary Stamp Tax Regulations reading: "Sec. 163. Contract for sale of land . If contract for the sale of land vests title on the land and improvements thereon, it would be subject to taxation as a conveyance. If it does not vest title but contains only certain provisions for the giving of a deed in the future upon compliance with conditions precedent, it is not subject to tax ." (emphasis supplied) the execution of an Absolute Deed of Assignment which is in the nature of a Contract to Sell in favor of your client/customer does not vest title upon the vendee. On the other hand, a Deed of Absolute Sale is an evidence of the perfection of a Contract to Sell. The former comes after the latter (BIR Ruling No. 050-96 dated April 11, 1996). The operative act in the perfection/consummation of a Contract of Sale of real property is the issuance of the Deed of Absolute Sale. Accordingly, in the instant case, the documentary stamp tax is payable upon the execution of the Deed of Absolute Sale. 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. aisadc Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue