BIR Ruling No. 293-2022

REPUBLIC OF THE PHILIPPINES DEPARTMNT OF FINANCE BUREAU OF INTERNAL REVENUE

Quezon City

Secs 24(D)(1), 98,& 196, Tax Code of 1997, as amended BIR Ruling No.779-18 OE-293-2022 JUN1 4 2022

67 Fifth Steet New Manila 1112 Quezon City W.TANLAW GROUP

Attention: Atty. Pearlyn S. Tan

Gentlemen:

the title of property from the trustee to the trustor is not'subject to capital gains tax (CGT) and documentary stamp tax (DST). Mrs. Tongcoor the "Trustor) for confirmation of your opinion that the reconveyance of This refers to your request on behalf of your client, MRS. ZENAIDA V. TONGCO

Sackground

On August 31, 2009, Mrs.11co entered into a Trust Agreement with her son. holding Ouiy the legal title to properties located in Pinugay, Baras, Riza: that she as Document No.301, Page No.61,Book No.60,Series of 2009. Notary Public Joel G. Gordola in Quezon City and recorded in his notarial books Raymond Misael V. Tongco (Mr. Tongcoor the Trustee for the purpose of was i the process of purchasing. The Trust Agreement was authenticated before

2. Pursuant to the Trust Agreement, seventeen 17 Deeds of Absolute Sale were entered into by and between Milestone Farms, Inc. with Mr. Tongco on September 2, 2009, which was recorded in the notarial books of Delfin R. Agcaoili, Jr. in the City of Manila.

3. Said properties were transferred and registered in the name of the Trustee under new Transfer Certificates of Title (TCT), as follows:

Block No. Lot No. (in sq. m.) Area Previous TCT No. New TCT No.

16 1

60 19

60 20

W.Tan Law Group(MRS.ZENAIDA V.TONGCO) F"ge 2 of 5 CT-293-2022 JUN 1 4 2022

Block No. Lot No. (in sq. m.) Area Previous TCT No. New TCT No.

4

87 26

1 29

L 30 6 33 16 2 22 4

26 23

26 24 29 29 29 30 18 22 34 34 6 38 1 3 12 39 38 39 39 44 44

4 10 4 25 4 26 49 3

49 4 52 6 52 T

22 20

W.Tan Law Group (MRS.ZENAIDA V.TONGCO) Page 3 of 5 OT2 93-2022 JU 1 4 2022

Block No. 26Lot No. (in sq. m.) Area Previous TCT No. New TCT No.

56 26

56 2 58 58 8

68 3 68 4

68 27 8 28

46 1 9 39 9 40 81 86 10 22

4 8 10

1 6

6 3

3 16 3 15

2

2 8

26

4.Under the Trust Agreement, Mr. Tongco confirmed that he merely held legal title to the properties and acknowledged his status as trustee. Further under said any reason upon prior written notice to the other. Agreement, the parties agreed that either party may terminate said agreement for

W.Tan Law Group (MRS.ZENAIDA V.TONGCO) Page 4 of 5 CT-293-2022 JUN 1 4 2022

On November 19.2019, Mrs. Tongco gave due notice to the Trustee that she to the T.ustor. Both parties acknowledged that based on the Trust Agreement, the conveyance back to the Trustor was made without any monetary consideration. agreed to cancel the Trust Agreement and to convey the properties held by him back Trustor has been the true and beneficial owner of the properties, an I so the intended to terminate the Trust Agreement, and thereafter executed a Cancelation of Trust and Deed of Conveyanvhich was signed by both parties and recorded in the notarial books of Atty. Jose Floro P. Crisologo in Quezon City as Document No. 102, Page N.31,Book No.5-D,Series of 2019. In this document, the rustee

Tax Code of 1997,as amended provides,viz. In reply, please be informed that Section 24D(1) of the National Internal Revenue

"SEC. 24.Income Tax Rates.

(D)Capital Gains from Sale of Real Property. -

final tax of six percent (6%) based on the gross selling price or current fair option of the Taxpaver. trusts: Provided, That the tax liability, if any, on gains from sales or other dispositions of real property to the government or any of its political subdivisions or agencies or to gove-nment-owned or -controlled corporations shall be determined either under Se-t: n 24(A) or under this Subsection, at the located in the Philippines, classified as capital assets, including pacto de retro sales and other forms of conditional sales, by individuals, including estates and market value as determined in accordance with Section 6(E) of this Code. whichever is higher, is hereby imposed upon capital gains presumed to have been realized from the sale, exchange, or other disposition of real property In Genera. -- The provisions of Section 39(B) notwithstanding, a

involved, since Mrs.Tongco is the real owner of the subject properties, while Mr. Tongco acted merely as trustee. In the instant case, however, there is no sale, exchange or disposition of real property

the reconveyance is for the purpose of returning the property to the legal owner and merely property in the name of Mrs. Tongco, the Trustor. acknowledges, confirms and consolidates the legal title and beneficial ownership over the Moreover, the conveyance is not motivated by a valuable consideration considering that

In BIR Ruling No. 031-99 dated March 19, 1999, this Office had occasion to rule that:

original owner and the Trustee. The conveyance is merely to be treated as a beneficiary of the subject properties." be treated as another transfer separate and distinct from the sale between the continuation and confirmation of title in favor of the ultimate and real properties which the former acquired by virtue of the Trust Agreement is not to : : the conveyance hy the Trustee in favor of the Trustor of the subject

Page 5 of 5 W.Tan Law Group(MRS. ZENAIDA V.TONGCO OT293-2022 JUN 1 4 2022

Accordingly, the transfer of title of the afore-stated properties by the Trustee in favor of

prescribed in Revenue Regulations (RR) Nc.2-98, as amended, implementing Section 57 (B the beneficiary, who is the beneficial owner thereof is not subject to CGT imposed under Section 24 (D)(1) of the Tax Code of 1997, as amended nor to the creditable withholding tax of the Tax Code of 1997, as amended.(BIR R.ing No. 779-2018 dated May 8, 2018)

May 8,2018) 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 pur'view the instant case considering that the supposed purchaser is actually the owner thereof. Furthermore. que trust without valuable consideration are not subject to tax. (BIR Ruling No. 779-2018 dated subject to the DST imposed therein are those where the realty sold shall be granted, assigned, under Section 191 of RR No. 26, otherwise known as the "Documentary Stamp Tax Regulations", conveyances to a trust without valuable consideration, or from a trustee to a cestui Under Section 196 of the Tax Code of 1997, as amended, the deeds or docments

of Reconveyance is subject to the P30.00' DST as imposed under Section 188 of the same Tax Mrs. Tongco, the real owner thereof is in connection and in recognition of a trust, the said transfer, therefore, is not subjeat to the DST imposed under Section 196 of the Tax Code of Code. 1997,as amended. However, the notarial acknowledgment to the Cancelation of Trust and Deed Since the reconveyance of the afore-stated properties by the Trustee in favor of

imposed on the transfer by any person, resident or non-resident, of property by gift. The donor's properties to Mrs. Tongco by the Trustee is exempt from the donor's tax imposed under Section tax applies, whether such transfer is in trust or otherwise, whether the gift is direct or indirect, patrimony of the donee,and(3 the intent do an act of liberality animus donandi. In this transfers the ownership ef the subject properties to the true owner, hence, the transfer of the 98 of the same Tax ode. anc whether the property is real or personal, tangible or intangible.The essential elements of a valid donation are: (1) the reduction of the patrimony of the donor, (2) the increase in the case, there is no intention to donate on the pa.i of the Trustee since the reconveyance merely Section 98 of the Tax Code of 1997, as amended, provides that a donor's tax is generally

if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered null and void. This ruling is being issued on the basis of the foregoing facts as represented. However,

Very truly yours,

Ruo

K-1 Commissioner of Internal Revenue CAESAR R.DULAY i"051840

1 The new DST rate of P30.00 was used since the transaction took place after to the effectivity of the TRAIN Law.