BIR Ruling [UN-238-94]

August 10, 1994 BIR RULING [UN-238-94] Biosphere Realty Developers, Inc. #4 Mazaraga Street Quezon City Attention: Mr . Mario T . Tan Gentlemen : This refers to your letter dated July 17, 1994 stating that your company, Biosphere Realty Developers, Inc. (BIOSPHERE), a corporation duly organized and existing under the laws of the Philippines, declared property dividends out of its unrestricted retained earnings as of July 1, 1994, in favor of its stockholders of record as of July 1, 1994; that the stockholders of BIOSPHERE are six (6) individual Filipino citizens and two (2) domestic corporations. cdtech In connection therewith, you now request confirmation of your opinion as follows: "(A) That a receipt by citizens or residents of property dividends is subject to zero percent income tax pursuant to Section 21 (c) (2) of the Tax Code which provides: SEC. 21. Tax on citizen or residents . xxx xxx xxx (c) Certain passive incomes A tax at the rate prescribed below is hereby imposed upon the amount of the following items of gross income received by a citizen or resident alien from sources within the Philippines: xxx xxx xxx (2) Dividends received from a domestic corporation and the share of an individual partner in a partnership subject to tax under Section 24 (a) at the rate of 15% in 1986; 10% effective January 1, 1987; 5% effective January 1, 1988; and 0% effective January 1, 1989." (B) Likewise the receipt of property dividends by domestic corporation from BIOSPHERE which is also a domestic corporation is not subject to tax pursuant to Section 24 (a) (4) of the Tax Code which provides: SEC. 24. Rates of tax on domestic corporations. xxx xxx xxx (e) Tax on certain incomes derived by domestic corporations. xxx xxx xxx (4) Intercorporate dividends Dividends received by a domestic corporation from another domestic corporation shall not be subject to tax." In reply thereto, please be informed as follows: A. That we confirm your opinion that the declared property dividend which shall be received by the stockholders (individual citizens or residents and domestic corporations) of BIOSPHERE shall be subject to a final withholding tax of zero (0%) percent, and the receiving stockholders shall not be subject to any income or capital gains tax arising from their receipt of these properties as property dividend. (Sections 21 (c)(2) and 24 (a) (4) of the Tax Code, as amended by Executive Order No. 37). B. That the Deeds of Conveyance to be executed between BIOSPHERE and the recipient stockholders covering the real estate properties declared as property dividends, not being a sale and without monetary consideration is not subject to the documentary stamp tax under Section 196 of the Tax Code, as amended, but only to the documentary stamp tax of P10.00 on certificates under Section 188 of the Tax Code, as amended (BIR Rulings Nos. 108-93 dated March 16, 1993; 498-93 dated December 20, 1993). This shall serve as your authority to obtain the necessary certificate authorizing transfer of the real estate properties from the Revenue District Officer of the Revenue District where the real estate properties are located. cdtech Very truly yours, ALICIA P. CLEMENO Acting Assistant Commissioner (Legal Service)