BIR Ruling [UN-104-94]

March 28, 1994 BIR RULING [UN-104-94] Bureau of Public Works Employees HOUSING ASSOCIATION, INC. Bureau of Public Works, Manila Attention: Engr . Nestor V . Agustin President Gentlemen : This refers to your letter dated February 1, 1994, in effect requesting for a ruling that the transfer/subdivision of two (2) parcels of land registered in the name of the Bureau of Public Works Employees Housing Association, Inc. (BPWEHA, Inc.) covered by Transfer Certificates of Title Nos. T-157923 & (T-176597) 15959 among its members is exempt from capital gains tax. It is represented that BPWEHA, Inc. is a non-stock, non-profit organization duly registered with the Securities and Exchange Commission (SEC); that you were organized to promote and enhance the development of housing for the employees of the Bureau of Public Works and other members of the association, with the aim of realizing the dream of having an ideal place to live, within their paying capacity; that pursuant to this purpose, you purchased two (2) parcels of raw lands located in Bo. Lingunan, Canumay & Bo. Lawang Bato, Valenzuela, Metro Manila, and covered by Transfer Certificates of Title Nos. T-157923 & (T-176597) 15959 issued by the Register of Deeds for the Province of Bulacan; that at the time of the purchase, the necessary government taxes were already paid by the contracting parties; that you have finally decided to subdivide and transfer the said properties among the members, who are very much willing to pay the documentary stamp tax arising from the said subdivision/transfer; that all of the necessary permits for subdividing the said properties were already approved by the concerned government agencies, in fact, individual tax declarations of the subdivided lost among the members were already issued by the Municipal Assessor's Office of Valenzuela. In reply, please be informed that the transfer in favor of your individual members of your said subdivided properties 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 same 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 who actually bought the same through your association. In other words, the transfer is without any consideration because you are in fact transferring properties the ownership of which actually belongs to the members. 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). 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). This ruling is being issued on the basis of the foregoing statement of facts. However, if upon investigation the facts turnout different, then this ruling shall not apply (BIR Ruling No. 153-91 dated August 16, 1991). Very truly yours, ALICIA P. CLEMENO Officer-in-Charge(Legal Service)