BIR Ruling [UN-189-94]

June 28, 1994 BIR RULING [UN-189-94] De Guzman Florentino Celis Moncupa & Torio Suite C, 15th Floor Strata 200 Building Emerald Avenue, Ortigas Center 1600 Pasig, Metro Manila Attention: Atty . Amalia E . Dionisio Gentlemen : This refers to you letter dated June 18, 1993 requesting in behalf of your client, Corporate Investments Philippines, Inc. (CIPI) for a confirmation of your opinion that no creditable withholding tax is payable and therefore, no documentary stamp tax under Section 196 of the Tax Code, as amended, is collectible for the conveyance of real property not in connection with a sale. cdtech It is represented that on October 7, 1989, Pacific Plaza, Inc. (PPI) and Goldenrod, Inc. (GI) entered into a Contract to Seil over a condominium unit identified as Unit 34-B of the Pacific Plaza Condominium Project for the amount of P5,987,919.60; that on August 8, 1990, in order to secure the payment of certain loans obtained by GI from CIPI in the amount of P6,000,000.00, which was used to pay said condominium unit, the former executed a Real Estate Mortgage in favor of the latter over the aforementioned condominium unit; that the said mortgage was not registered because the condominium project was still under construction at that time, and to further secure the payment of the said loan obligation, GI executed a Deed of Assignment in favor of CIPI of all its rights and interest over the aforesaid condominium unit, the purpose being to fully protect CIPI of its rights under the said unregistered mortgage; that on December 20, 1991, without the knowledge of CIPI & GI, PPI executed a unilateral Deed of Absolute Sale in favor of CIPI covering the subject condominium unit that by virtue of said unilateral Deed of Absolute Sale, a Condominium Certificate of Title was subsequently issued in the name of CIPI; that an implied trust has been credited under Article 1450 of the New Civil Code which provides: ARTICLE 1450. "If the price of a sale of property is loaned or paid by one person for the benefit of another and the conveyance is made to the lender or payor to secure the payment of the debt, a trust arises by operation of law in favor of the person to whom the money is loaned or for whom it is paid. The latter may redeem the property and compel a conveyance thereof to him." and that Article 1456 of the same Code further provides: ARTICLE 1456. "If property is acquired through mistake or fraud, the person obtaining it, is by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes." (Emphasis supplied) that your client, the trustee, does not want to accept the title from the Register of Deeds of Makati because it was never their intention to register the Condominium Unit in its name, and desires to transfer the title of the Condominium Unit in favor of GI, the true and real owner thereof, through a Deed of Conveyance. In reply, please be informed that your opinion that since the said Deed of Conveyance in favor of GI is neither a sale, exchange, nor disposition of real property, the purpose of which is to correct the mistake and to give effect to the true and real intention of the parties, and therefore, not in connection with a sale, no income was generated and therefore, no creditable withholding tax is payable and collectible is hereby confirmed. Further, conveyance of realty not in connection with a sale, to trustees or other persons without consideration are not taxable (Sec. 185, Regulation No. 26, Revised Documentary Stamp Tax Regulations), therefore, the Register of Deeds of Makati may transfer the title of the Condominium Unit in the name of GI by virtue of the said Deed of Conveyance without payment of the creditable withholding tax and documentary stamp tax. However, the above transaction is subject to the ten-peso (P10.00) documentary stamp tax imposed by Section 188 of the Tax Code, as amended. 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. (BIR Ruling No. 027-93 dated January 15, 1993) cdtech Very truly yours, ALICIA P. CLEMENO Acting Assistant Commissioner Legal Service