BIR Ruling No. 329-12

May 11, 2012 BIR RULING NO. 329-12 Secs. 24 (D) (1), 98, 105, 196 of the 1997 NIRC; BIR Ruling No. 031-99 Romulo Mabanta Buenaventura Sayoc & De Los Angeles 30th Floor, Citibank Tower 8741 Paseo de Roxas, Makati City Attention: Atty. Reynaldo G. Geronimo Partner Gentlemen : This refers to your letter dated April 12, 2012 stating that: "1. On 02 October 1996, Jose Antonio M. Romulo (hereinafter referred to as the Trustor) entered into a Trust Agreement with Equitable Banking Corporation by virtue of which Trust Account No. 61-019-96 was established, whereby the Trustor conveyed to Equitable Banking Corporation, the amount of Five Million Eight Hundred Sixty Five Thousand Two Hundred Pesos (P5,865,200.00) in cash, in trust nevertheless for himself and reserving unto himself the right to revoke, amend, annul, cancel, and terminate the trust created thereby. 2. Pursuant to the terms of the Trust Agreement, Equitable Banking Corporation purchased, with the funds transferred to it in trust, a Condominium Unit, located at the 3rd Floor of the Renaissance Condominium, known as Residential Unit No. 305 (3-BR) consisting of One Hundred Forty Six and Sixty Three sq.m. more or less, covered by Condominium Certificate of Title No. 42364 of the Registry of Deeds of Makati City (the "Property") and caused the same to be registered in the name of Equitable Banking Corporation Trust Account No. 61-019-96. 3. Equitable Banking Corporation has since merged with the Philippine Commercial and Industrial Bank, with the surviving entity being named as Equitable PCI Bank, with principal office at 15/F PCIBank Tower I, Makati Avenue corner H.V. de la Costa street, Makati City. 4. Equitable PCI Bank has since merged with BDO Unibank, Inc.,the herein transferor being the surviving party. 5. The Trustor now wants the trust res, particularly the Property to be transferred to his name. 6. The owner of record of the said trust res as appearing in the Condominium Certificate of Title No. 42364 is still Equitable Banking Corporation (which as previously stated is now BDO Unibank, Inc.,the herein Transferor) and said successor entity as the owner of record is constrained, under applicable corporation, banking and trust law and regulation, to execute this Deed of Conveyance, necessary to give full effect to the wishes of the Trustor Jose Antonio M. Romulo of putting the property which he owns, in his own name." ESIcaC You now request for a confirmation of opinion that in as much as the Deed of Conveyance referred to involves no real transfer of ownership by BDO Unibank, Inc. of the trust res back to the same trustor of a revocable trust, no internal revenue tax is due thereon. In reply thereto, please be informed that your opinion is hereby confirmed as follows: The transfer of title of the afore-stated property by the trustee in favor of the beneficiary, who is the beneficial owner thereof is not subject to capital gains tax imposed under Sec. 27 (D) (5) of the Tax Code of 1997 nor to the creditable withholding tax prescribed in RR 2-98, as amended, considering that the conveyance is not motivated by a valuable consideration and merely acknowledges, confirms and consolidates the legal title and beneficial ownership over the properties in the name of Jose Antonio M. Romulo, the Trustor. Furthermore, in BIR Ruling No. 031-99 dated March 19, 1999, this Office has already ruled that: "...the conveyance by the Trustee in favor of the Trustor of the subject properties which the former acquired by virtue of the Trust Agreement is not to be treated as another transfer separate and distinct from the sale between the original owner and the Trustee. The conveyance is merely to be treated as a continuation and confirmation of title in favor of the ultimate and real beneficiary of the subject properties." The transfer of the properties to Jose Antonio M. Romulo is not likewise subject to the 12% VAT because the said property is not held primarily for sale to customers or for lease in the ordinary course of trade or business. The conveyance of the property to Jose Antonio M. Romulo without any monetary consideration is not subject to gift tax imposed under Sec. 98 of the 1997 Tax Code, since there is no donative intent on the part of the trustee. DEAaIS The Deed of Conveyance executed to terminate the trust relationship between the successor entity and Jose Antonio M. Romulo and the consolidation of the legal title and beneficial ownership over the subject property is a conveyance without monetary consideration, and as such not subject to the documentary stamp tax imposed under Sec. 196 of the same Tax Code, as amended. However, the notarial acknowledgment to such deed is subject to the documentary stamp tax of P15.00 under Sec. 188 of the 1997 Tax Code. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered as null and void. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue