Port Poyohon Settlers Association

March 8, 2010 BIR RULING [SH-(001) 005-10] Sec. 27 (D) (5); 57; 98; Sec. 185; RR No. 2; RR 2-98; BIR Ruling No. 398-93; BIR Ruling No. DA416-98 Port Poyohon Settlers Association Barangay 17, Port of Poyohon Butuan City Attention: Mr. Raymundo V. Abendao President Gentlemen : This refers to your letter dated June 16, 2009, which was referred to this Office by Revenue Region No. 17, Butuan City, by way of its 2nd Indorsement dated July 7, 2009, requesting for exemption from the payment of capital gains and documentary stamp taxes relative to the transfer by Port Poyohon Settlers Association, Inc. (the "Association" for brevity) among its individual members of a parcel of land bought by the Association from Figurado O. Plaza. Documents submitted show that the Association is a non-stock corporation, organized under the laws of the Republic of the Philippines and registered with the Securities and Exchange Commission (SEC);that the Association bought a parcel of land located at Barangay 17, Port Poyohon, Butuan City covered by TCT No. T-5490 issued by the Registry of Deeds for Butuan City; that the said property was acquired through a loan under the Community Mortgage Program (CMP) with the National Housing Authority (NHA),as Originator, as certified by the Social Housing Finance Corporation on April 14, 2009. In reply, please be informed that the transfer in favor of your individual member-beneficiaries is not subject to the capital gains tax imposed under Section 27 (D) (5) of the Tax Code of 1997, as well as the creditable withholding tax imposed under Revenue Regulations (RR) No. 2-98, implementing Section 57 of the Tax Code, considering that the transfer made is without any consideration since it is only a formality to finally effect the transfer of your properties to your member-beneficiaries who bought the same and thus, considered the actual owners of said property. (BIR Ruling No. DA-416-98 dated September 14, 1998) ISaTCD Moreover, the transfer of the property is not subject to the donor's tax imposed under Section 98 of the 1997 Tax Code. Apparently, there is no donative intent on the part of the Association to donate the said property to its members-beneficiaries, considering that no donation may exist to one who is the actual and rightful owner of the alleged property to be donated. Furthermore, Section 185 of the Revised Documentary Stamp Tax Regulations (Regulations No. 26)provides that "conveyances of realties not in connection with a sale to trustees or other persons without consideration are not taxable". Accordingly, the deeds of assignment to be executed by the Association to effect the aforesaid transfer in favor of its individual members are not subject to documentary stamp tax imposed under Section 196 of the Tax Code of 1997. However, the notarial acknowledgments to said deeds are subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the same 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.) MARISSA O. CABREROS OIC-Assistant Commissioner Legal Service