BIR Ruling No. 144-84

September 3, 1984 BIR RULING NO. 144-84 222-137-79-144-84 Gentlemen : This refers to your letter dated September 27, 1983 requesting exemption from the payment of taxes on your sale of a stock and building to the Government of Thailand. Documentary evidence submitted show that on September 14, 1983 A. J. Ledesma Construction Corporation executed a Deed of Sale of real property with the existing improvement thereon consisting of a four-storey building located in the Municipality of Makati, Metro Manila, covered by Transfer Certificate of Title No. S-94540, to the Government of Thailand represented by its Ambassador, Mr. H. E. Prajit Rojansphruk for and in consideration of P12,250,000.00; that the aforesaid property shall be used as the official residence of the Royal Thai Ambassador to the Philippines and offices of the Thailand Government Embassy; and that paragraph VI of the said Deed of Sale of Real Property provides: "The VENDOR agrees to undertake, at its own expense , the registration in the VENDEE's name of the property herein sold, Provided, that all papers, document, and/or clearances necessary therefor shall be made available by the VENDEE to the VENDOR. The VENDEE hereby states that under the Agreement between the Philippines and the Thai Governments dated May 21, 1963 on the acquisition of land and buildings in the territory of the other to be used as residence and offices of the Embassy, this agreement is exempt from payment of transfer taxes." In reply, I have the honor to inform you that you are subject to the ordinary corporate income tax prescribed under Section 24 of the Tax Code, as amended on any gain which you derived from your sale of the aforesaid lot and building to the Government of Thailand. Moreover, pursuant to Section 222 of the Tax Code, as amended, the documentary stamp taxes due on documents shall be paid by the person making, signing, issuing, accepting or transferring the same, which provision of law was interpreted by the Court of Tax Appeals as placing the burden of paying the tax upon the parties to the contract and leaves the tax to be paid indifferently by either party (Sta. Clara Lumber Co., Inc. vs. Jose Araas, C.T.A. Case No. 502 June 12, 1959). Thus, where one party to the contract is exempt from said tax, the other party, who is not tax exempt, shall be liable therefor. Accordingly, since the A. J. Ledesma Construction Corporation, the other party to the contract and the one assuming the payment of the expenses incidental to the registration in the vendee's name of the property sold, is not exempt from said tax, then it is the one liable therefor, pursuant to Section 245 in relation to Section 222 both of the Tax Code of 1977 as amended. In this connection, the exemption from payment of transfer taxes as provided for in the Agreement between the Philippine Government and the Royal Thai Government does not include the income tax and the documentary stamp tax to which you are liable as explained above. atdc Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner