Tax Exemption of the Transfer of Assets from a Government Corporation to the National Government

May 25, 1992 BIR RULING NO. 161-92 24 000-00 161-92 Strategic Investment Development Corporation SIDCOR Bldg., University of Life Complex, Meralco Avenue, Pasig, Metro Manila Attention: Mr . Gerardo I . Ledesma, Jr . Officer-in-Charge Gentlemen : This refers to your letter dated October 22, 1991, and January 23, 1992 stating that Strategic Investment Corporation (SIDCOR) is a corporation wholly-owned and controlled by the government and created under P.D. 1396; that on October 17, 1989, the President of the Philippines issued Executive Order No. 373 instructing that ". . . SIDCOR shall immediately turn over to the DECS the management, operation and ownership of all the assets at the UL Complex. . ." and that in the meantime ". . . the assets may be received by the National Treasury on behalf of the National Government in partial settlement of the Biglang Bahay Bond Liability of SIDCOR, at a value to be determined by the Commission on Audit; the ownership of these assets in turn to be turned over to DECS . . ."; that to implement the aforementioned Executive Order the concerned agencies executed a Memorandum of Agreement on January 29, 1991; that COA valued the assets at P1.092 Billion; whereas SIDCOR's liability to the National Government had amounted to P1.218 Billion; that to cover the difference, SIDCOR also ceded promissory notes and cash to the Treasury, as follows: a. Transfer/assignment of the whole UL Complex (land, buildings and movable assets) valued at P1,092,332,176.00 b. Assignment of HIGC 5-year, non-interest bearing promissory notes back-up by BLISS Housing Mortgages amounting to 114,882,000.00 c. Cash payments amounting to 64,259,156.03 P1,272,473,332.03 ============= that upon submission to the BIR of all documents relative to the transfer, you were given an assessment of the taxes to be levied on SIDCOR substantially as follows: Documentary Stamp Tax (at 1% of total P1.218 B, and not just on the value of the assets being transferred) P12,180,220.00 Creditable Withholding Tax (at 5% of P1.218 B) 60,901.085.00 Penalty on Documentary Stamp Tax (at 25% of DST) 3,045,055.00 P76,126,360.00 =========== that you are of the opinion that no taxes ought to be assessed on the transaction, considering that this is a transfer of assets from a government corporation to the National Government; that the transaction is not a cash sale but rather a settling of settlement of account are affected pursuant to an Executive Order. In connection thereto, you now request a ruling to the effect that the transaction is exempt from documentary stamp tax, creditable withholding tax, capital gains tax and other transfer taxes, fees and penalties since the transfer of assets is from a government corporation to the National Government. In reply thereto, I have the honor to inform you that the turn over by SIDCOR of the management, operation of ownership of all the assets at the UL Complex which was valued by COA at P1.092 Billion to the National Government and in turn to be turned over to the DECS is not subject to the documentary stamp tax and creditable withholding tax since the aforementioned transfer is in settlement of SIDCOR's liability to the National Government. adc Very truly yours, JOSE U. ONG Commissioner of Internal Revenue