BIR Ruling No. 160-15

May 6, 2015 BIR RULING NO. 160-15 Secs. 27 (D) (5), 188 & 196 Tax Code of 1997, as amended; 000-00 Philippine Cooperative Center #90 Balete Drive Extension Brgy. Kristong Hari, Quezon City Attention: Agapito "Butz" Aquino Chairman Gentlemen : This refers to your letter dated May 10, 2012, requesting for a ruling that the conveyance of the title of the property from the trustee to the beneficiary is not subject to the capital gains tax and documentary stamp tax. It is represented that in the General Appropriations Act of 1994, an amount of Forty Million Pesos (P40,000,000.00) was allocated under the budget of the Cooperative Development Authority (CDA) for the establishment of Cooperative Center; that on December 5, 1995, a Memorandum of Agreement was executed and entered by Cooperative Development Authority and Cooperative Foundation Philippines, Inc. (CFPI), whereby CDA shall transfer the amount of P40,000,000.00 to CFPI and CFPI shall act as the Trustee of the amount to be granted by the CDA and of the acquired real property until such time the same have been transferred to a qualified juridical entity chosen by the Steering Committee; that on December 13, 1995, CFPI bought a certain property from spouses Pedro and Marietta Porciuncula, identified as Lot 2-A-2 of the subd. plan Psd-17568, being a portion of Lot 2-A, Blk. 40, described on plan Psd-11974, GLRO Rec. No. 917 covered by Transfer Certificate of Title (TCT) No. RT-65828 (381542) issued by the Registry of Deeds for Quezon City; that the aforesaid property is situated at Cubao, Quezon City with an area of one thousand four hundred forty nine square meters (1,449 sq.m.), more or less, as a result, TCT No. RT-65828 (381542) was cancelled and TCT No. 150001 was issued in the name of the CFPI; and that the corresponding Capital Gains Tax (CGT) and Documentary Stamp Tax (DST) of the transfer of property from spouses Pedro and Marietta Porciuncula to CFPI were duly paid as evidenced by the Certificate Authorizing Registration (CAR) No. 913610 issued by Revenue District Office No. 39-South Quezon City on January 5, 1996. It is further represented that the Steering Committee was tasked under the Memorandum of Agreement (MOA) between the CDA and CFPI to organize a cooperative composed of national cooperative organizations as Beneficiary Owner of the property to be bought by CFPI in Trust for the Beneficiary Owner; that not later than December 31, 1996, CFPI shall transfer ownership of the real property and the fund balance, if any, to a juridical person which shall be organized by the Steering Committee; that per Certification dated July 16, 2002, the Steering Committee confirmed the Philippine Cooperative Center (PCC) as the Beneficiary Cooperative of the property covered by TCT No. RT-65828 (381542) (now TCT No. 150001);and that on July 17, 2002, a Deed of Conveyance was executed whereby CFPI transferred the abovementioned property to PCC. Hence, this request for tax exemption on the transfer of title from the name of CFPI to the name of PCC. In reply, please be informed that, as a rule, the transfer of property from a trustee in favor of the beneficiary, as the true and beneficial owner, without monetary consideration and is merely a confirmation of title in favor of the beneficial owner thereof, is not subject to the capital gains tax imposed under Section 27 (D) (5) of the Tax Code of 1997, as amended, and likewise not subject to the documentary stamp tax imposed under Section 196 of the same Code.However, the notarial acknowledgment to the said deed is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the said Code. The MOA provides that, "not later than December 31, 1996, CFPI shall transfer ownership of the real property and the fund balance, if any, to a juridical person which shall be organized by the Steering Committee". 1 The MOA further provides that "Any violation or failure by CFPI to comply with the agreement set forth herein shall cause the automatic cancellation of the Memorandum of Agreement". 2 As represented, it was only on July 17, 2002 that CFPI transferred the abovementioned property to PCC. PCC was not even in existence yet when the property was acquired by CFPI from spouses Porciuncula nor during the deadline set in the MOA which is December 31, 1996. Thus, considering that the transaction took place beyond the period set by MOA, the same is considered a failure on the part of CFPI to comply with the terms of MOA. Regrettably, your request that you be entitled to tax exemption on the transfer of title from the name of CFPI to the name of PCC is hereby denied for lack of factual and legal bases. Such transfer is subject to donor's tax. 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. aDSIHc Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue Footnotes 1. Item 3.4, Article II, MOA. 2. Item 7, Article I, MOA.