BIR Ruling [UN-099-94]

February 23, 1994 BIR RULING [UN-099-94] Samahang mga Dukhang Magkakapitbahay ng Umboy, Inc. Umboy, Tinajeros, Malabon Metro Manila Attention: Mr . Abelardo L . De Leon President Gentlemen : This refers to your letter dated February 21, 1994 in effects, requesting for a ruling that the transfer/subdivision of a parcel of land registered in the name of Samahang mga Dukhang Magkakapitbahay ng Umboy, Inc. covered by Transfer Certificate of Title No. 2699 among its members is exempt from capital gains tax. cdtech Documents submitted disclosed that the Samahang mga Dukhang Magkakapitbahay ng Umboy, Inc. is a non-stock, non-profit community organization duly registered with the Securities and Exchange Commission (SEC); that it was organized to promote the welfare and well being of the community as a whole, and to secure loan from MMMFC; that the Association is a recipient of a Community Mortgage Program (CMP) of the government over a parcel of land owned by B.E. San Diego, Inc. located at Umboy, Tinajeros, Malabon, Metro Manila, and now covered by Transfer Certificate of Title No. 2699 registered in the name of the Association; that the Association has decided to subdivide and transfer the said property among the members-beneficiaries, as mandated by law, so that individual titles can be finally issued in their names. In reply, please be informed that the transfer in favor of your individual members-beneficiaries of your said subdivided property is not subject to either the capital gains tax imposed under Section 21(e) of the Tax Code, as amended, or the creditable withholding tax imposed under Revenue Regulations No. 1-90 implementing Section 50(b) of the same code considering that the said transfer of your property is without any consideration since it is merely a formality to finally effect transfer of title of the said property to your members-beneficiaries who actually bought the same from B. E. San Diego, Inc. through your association. In other words, the transfer is without any consideration because you are in fact transferring property the ownership of which actually belongs to the members-beneficiaries. Such lack of consideration does not likewise, render the said transfer subject to the donor's tax imposed under Section 93 of the Tax Code, since there is no intention on your part to donate the said property to said members considering that you could not donate property the ownership of which belongs to the donee (members-beneficiaries). Finally, under Section 196 of the Tax Code, as amended, all conveyances, deeds, instruments, or writings, other than grants, patents, or original certificates of adjudication issued by the Government, whereby lands, tenements or other realty sold shall be granted, assigned, transferred, or otherwise conveyed to the purchaser or purchasers, or to any other person or persons designated by such purchaser or purchasers shall be subject to a documentary stamp tax at the rate of P15.00 for every one thousand pesos or less or fractional part thereof in excess of one thousand pesos based on the consideration or value received or contracted to be paid for such realty (as amended by R.A. 7660). It is noted that under the above cited provision of the Tax Code, the deed or document subject to the documentary stamp tax imposed therein are those where the realty sold shall be granted, assigned, transferred, or otherwise conveyed to a purchaser or purchasers or to any other person or persons designated by such purchaser or purchasers thereby excluding from its purview the instant case considering that the supposed purchasers are actually the owners thereof. Besides, no monetary consideration is involved in said transaction upon which the tax imposed in said section could be based. Accordingly, the transfer of title of the said property in favor of your members-beneficiaries is not subject to the documentary stamp tax imposed under Section 196 of the Tax Code, as amended. However, such Deeds are subject to the documentary stamp tax of P3.00 (now P10.00) imposed under Section 188 of the Tax Code, as amended (BIR Ruling No. 398-93 dated October 11, 1993). Very truly yours, ALICIA P. CLEMENO Officer-in-Charge (Legal Service)