BIR Ruling [UN-058-94]

February 14, 1994 BIR RULING [UN-058-94] Mr. Oscar L. Sevilla Revenue District Officer Revenue District Office, No. 35-A Marikina, Metro Manila S i r : In reply to your letter dated January 12, 1994 relative to the request of Petron Corporation, 7901 Makati Avenue, Makati, Metro Manila, for exemption from the payment of the creditable withholding tax on sales, exchanges or transfers of real property under Revenue Regulations No. 1-90 on the Deed of Conveyance of its real properties covered by TCT No. 83959 situated in the Municipality of San Mateo; TCT Nos. 246738, 246739, 246740, 246741, 246742, 246743 and 246744 situated in the Municipality of Antipolo; TCT Nos. 278700, 278701 and 278703 situated in the Municipality of Marikina, all of the Registry of Deeds of Marikina, Metro Manila, in favor of PNOC by way of property dividends with some of the properties to be leased back to Petron at lease rates acceptable to both parties to allow for unhampered operations of Petron, please be informed that in BIR Ruling No. 130-89 dated June 21, 1989, this Office held that a company is not subject to income tax or capital gains tax when it declares and transfers its real properties as property dividends in favor of its stockholders as in this case. A company realized no taxable income in declaring a dividend since the distribution of dividends among the stockholders is not a sale nor were assets used to discharge an indebtedness (See General Utilities and Operating Co. v. Helvering 296 U.S. 200-207). Such being the case, Petron is not subject to the 5% creditable withholding tax on sales, exchanges and transfers of real property under Revenue Regulations No. 1-90 as amplified by Revenue Memorandum Circular No. 7-90 when it distributed its real properties as property dividends to its stockholder, PNOC. (BIR Ruling No. 130-89 dated June 21, 1989). cdtech Very truly yours, JAIME M. MAZA Assistant Commissioner (Legal Service)