BIR Ruling No. 154-10

December 22, 2010 BIR RULING NO. 154-10 Secs. 24 (D) (1); 196; 188; BIR Ruling No. DA-158-2001; BIR Ruling No. DA-497-2006; BIR Ruling No. DA-125-2000; BIR Ruling No. DA-007-2001; BIR Ruling No. DA-068-1998 Doa Nicasia Realty Corporation VGP Center, 6772 Ayala Avenue, Makati City Attention: Luis B. Puyat President Gentlemen : This refers to your letter dated September 28, 2010, requesting exemption from the payment of capital gains tax and documentary stamp tax in connection with your exchange of properties with Manila Banking Corporation, without monetary consideration to correct the mistake due to error committed by the Registry of Deeds in the issuance of the title pursuant to the pertinent provision of the Tax Code of 1997 as amended. ISHaCD It is represented that Manila Banking Corporation, ("Manilabank" for short), now Chinabank, with TIN: 000-504-532 and Doa Nicasia Realty Corporation, ("Doa Nicasia" for short), with TIN: 000-450-389, both domestic corporations are related companies, as there are interlocking stockholders between these two (2) companies; that from the very start of their operations, they bought their respective office spaces in the same Manilabank Building located at 6772 Ayala Ave. Makati; that from its inception up to the present, Doa Nicasia was occupying the 10th Floor of Manilabank Building, while Manilabank was occupying the 7th Floor, which to their belief, these properties rightfully belong to them; that however, upon verification from the Registry of Deeds for Makati City, it was discovered that Condominium Certificate of Title (CCT) No. 4313, located at the 7th floor, where Manilabank was holding its office was registered in the name of Doa Nicasia while CCT No. 5168, located at 10th Floor where Doa Nicasia was occupying was registered in the name of Manilabank; that they are not willing to give up their respective office spaces as they have now introduced important structures geared toward their business styles and purposes; that the parties are now contemplating to swap their properties without monetary consideration in order to correct the error committed by the Registry of Deeds of Makati in the issuance of their respective titles. In reply, please be informed that since the exchange transaction is without monetary consideration, and that the execution of the Deed of Exchange is merely to correct the mistake resulting from the error committed by the Register of Deeds in the issuance of their respective CCT's, 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 withholding tax imposed under Revenue Regulations No. 2-98, as amended. (BIR Ruling No. DA-497-2006 dated August 15, 2006; BIR Ruling No. DA-158-2001 dated September 7, 2001; BIR Ruling No. DA-125-2000 dated February 25, 2000) Furthermore, the said exchange of real properties is not likewise subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. However, the Notarial Acknowledgment to the said deed is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the same Code. (BIR Ruling No. DA-068-98 dated March 2, 1998; BIR Ruling No. DA-007-2001 dated January 30, 2001) 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. TEAICc Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue