BIR Ruling No. 468-11

December 2, 2011 BIR RULING NO. 468-11 Sec. 24 (D) (1), Sec. 196 NIRC; BIR Ruling No. 154-2010 Iglesia ni Cristo Ecclesiastical District of Davao INC Compound, No. 56 National Highway Magugpo East, Curvada Tagum City Attention: Mr. Daniel Solidor Land Registration Officer of INC Gentlemen : This refers to your letter dated November 24, 2010, requesting for exemption from the payment of capital gains tax as well as documentary stamp tax on the exchange of real properties executed by Iglesia ni Cristo ("INC") and Mr. Alfredo Jayag to correct a mistake and without any monetary consideration. Documents submitted show that Mr. Alfredo Jayag was the owner of a parcel of land located in Mainit, Nabunturan, Compostela Valley with a total area of 5,000 sq. m. covered by Transfer of Certificate of Title (TCT) No. T-39691 of the Registry of Deeds for the Province of Davao del Norte; that INC acquired from Mr. Alfredo Jayag one half of the said lot or an area of 2,500 sq. m. on August 25, 1997 by virtue of a Deed of Absolute Sale; that the portion of the lot purchased by INC is described as lot 299-B-7-C-1-A, Psd 11-056627; that INC caused the registration of the land under its name and was issued Transfer of Certificate of Title (TCT) No. T-138018 by the Registry of Deeds for the Province of Davao del Norte and took immediate possession of the same by constructing a church building thereon; that it was found out later that, due to an error committed in the technical description of the lot, the lot actually being occupied by the INC is Lot No. 299-B-7-C-1-B which is covered by TCT No. T-138019 registered under the name of Mr. Alfredo Jayag , and not Lot 299-B-7-C-1-A, Psd 11-056627; and that to rectify the mistake, a Deed of Exchange was executed by and between the INC and Mr. Alfredo Jayag without any consideration involved. In reply, please be informed that since there is no actual sale, exchange or voluntary disposition of real properties, but just a mere exchange without valuable consideration and considering that the conveyances were made merely for the purpose of correcting a mistake, the herein exchange of properties is therefore, not subject to capital gains tax under Section 24 (D) (1) of the Tax Code of 1997. ( BIR Ruling No. 154-2010 dated December 22, 2010) Moreover, conveyance of realty to trustees or other persons without consideration is not taxable under Revenue Regulations No. 26 otherwise known as the Revised Documentary Stamp Tax Regulations. Thus, the Deed of Exchange executed by the parties which was made without monetary consideration is not subject to the documentary stamp tax imposed under Section 196 of the 1997 Tax Code, as amended. However, the notarial acknowledgment to said deed is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the same Tax Code, as amended. ( BIR Ruling No. 154-2010 dated December 22, 2010) 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. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue