BIR Ruling No. 316-2022

REPUBLICOF THE PHILIPPINES

BUREAU OF INTERNAL REVENUE DEPARTMENT OF FINANCE

Quezon City

JUN 2 8 2022 Sec. 63 of NIRC; Code Arts.1448 & 1453 of the Civil ot-316-2022 Person to Contact: Chief, Law Division Tel Nos. 926-5536/927-0963

Makati City 30th Floor Citibank Tower 8741 Paseo de Roxas ROMULO MABANTA BUENAVENTURA SAYOC &DELOS ANGELES

Attention: Attys. Jayson L. Fernandez Michael P.Garcia and

Gentlemen:

trust by PTRC for the benefit of SSS and PPC,respectively,in the following manner and 34th Floors, namely condominium unit numbers 33..A, 33-B, 33-C, 33-D, 34-A and "Tower Club; that subsequently, the SSS agreed to povide additional funding to the Philamlife Tower Project as a co-developer;that in a MSA dated September 9,1997 interests, rights and obligations to the Club Floors; that after the completion of the construction of the Philamlife Tower, the Club Floors ivere registered in the name of PTRC as trustee for PPC and SSS;that accordingly,th Condominium Certificates of Title corresponding to the Club Floors expressly indicate that the Club Floors are held in proportion to their respective contributions to the cost of construction and Philamlife Tower that were a.signed to PPC were condeminium unit located at the 33ra 34-B (the Club Floors which are currently occupied by a business club known as the executed by and between the SSS The Philippine Ameriean Life and General Insurance Company,PPC and PERF RealtyCorporationPPC agreed to assign to SSS its undivided condominiumization of the Philanlife Tower; that anong the floors and/or units of between The Philamlife American Life Insurance Cornpany, PPC and PERF Realty Corporation, whereby the parties agree t. finance the cost of con truction and condominiumization of various office fioors and paking spaces of the Philamlife Tower, and to contribute their prcportionate share in the construction cost of the comt .on areas of the Philamlife Tower; that in connection wih the Philamlife Tower MCA various floors and parking spaces in the Philamlife Towe: were assigned to the parties in Social Security System (SSS) is a goveinment owned-an-controlled corporation created under Republic Act (RA No.11i,otherwise known as the Social Security Actthat Philam Properties Corporation (PPC is a corporation organized an cxisting under the laws of the Philippines with SECRegistration No. Corporation (PTRC, is a corporation organized and existing under the laws of the SEC'Registration No. Philippines duly registered with the Securities and Excaange Commission (SEC) under that on May8,1996,a Memorandum of Agreement (MU-) was executed by and This refers to your request stating that your client, Philam Tower Realty wh TIN "; that on the other hand. wiTIN

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1.As trustee of sss:

34-A Condominium Unit No. 33-C 33-D Philamlife Tower Philamlife Tower Condominium Luilding Philamlife Tower ICCTC No.

2.As trustee of PPC

34-B Condominium Unit No. 33-A 33-B Philamlife Tower Philamlife Tower Philamlife Tower Condominium Building CCTC No.

that in addition, the existence of the trust arrangemens mentioned have been duly acknowledged by PTRC in separate Declarations of Trust both dated May 13,2011;that a consequence of the termination, PTRC, through the corresponding Deeds of Transfer and without receiving any consideration whatsoever, will transfer legal title to Sss and PPC,respectively,who are the beneficial owners of the Clt.b Floors. SSS and PPC have terminated their respective trust relationships with PTRC; and that as

consec uence of the termination of the trust relationships of PTRC with SSS and PPC, opinion that the transfer of legal title the Club Floors to the beneficial owners as a respectively, shall not be subject to: Based on the foregoing representations, you now request confirmation of your

1.Income tax including CWT or documentary stamp tax D since there is not receive any consideration under the foregoing transactions; no actual transfer of beneficial ownership of the Clu Floors and PTRC wi!l

2 Value-added tax (VAT) since the Club Floors are not held by PTRC primarily

for sale to customers or for lease in the ordinary course of its business as he Club Floors are merely held in trust for SSS and PPC,respectively;and

3. Donor's tax since the Club Floors are being transferred by PTRC without any termination of the trust relationship of PTRC with SSS and PPC,respectively. donative intent on its part but solely as a necessary consequence of the

only on the tax consequence of the transfer by the trustee,TRC of the Club Floors to the not pertain to the tax consequence, if any,of the assignment by PPC to SSS of its undivided interests, rights and obligations to the Club Floors pursuant to MOA dated whom the title is conveyed is a child, legitimate or illegitimate, of the one paying the price of the sale, no trust is implied by law, it being disputably presumed that there is a trustors, SSS and PPC, as a result iof the termination of the trust relationship. This does September 9, 1997.To begin with,Article 1448 of the Givil Code provides that there is an implied trust when property is sold,and the legal estate is granted to one party but the gift in favor of the child. price is paid by another for the purpose of having the beneficial interest of the property The former is a trustee, while the latter is the beneficiary. However, if the person to In reply thereto, please take note at the outset that this request for confirmation is

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conveyed to a person in reliance upon his dcciared intention to hold it for, or transfer it to another or the grantor, there is an implied trust in favor of the person whose benefi+ is contemplated. Moreover, Article 1453 of the Ci ode provdes that when the property is

Corollarily,Section 63 of the Tax Code of 1997 provides that -

trust is vested (1) in the grantor either alone or in conjunction with any person not having a substantial adverse interest in the power to revest in the grantor title to any part of the corpus of the disposition of such part of the corpus or the income therefrom, or Sec.63Revocable Trusts.-Whee at any time the

income of such part of the trust shall be included in computing the disposition of such part of the corpus or the income therefrom, the 2 in any person not having a substantial adverse interest in the taxable income of the grantor.

In the instant case, an implied trust is deemed created by law. This is so because PTRC, as the registered owner of the Club Floors, has legai ownership of the Club Floors. However,the said Club Floors were bought and/or financed by SSS and PPC and that PTRC merely holds the Club Floors in trust for SSS and PPC. It is to be noted that in a revocable trust, the trustor retains e right to control the disposition of the property including the right to cause the revers.on of the legal ownership of the property itseif. (BIR Ruling Nos. 013-05 dated August 16 2005; i29-93 dated April 5,1993; 128-93 dated April 5,1993;096-93 dated March 10,1993;anc 086-92 a March 19,1992 Thu the return or transfer of legai ownership of the property to the trus of a revocable trus is mere confirmation of the title of the trustor as the u imate and real owner beneficiary of the property and does not involve an actual transfer of the beneficial held in trust before and after the-return or transfer of legal ownership of the property. ownership of the property since the trustor ..ains the beneficial owner othe property

(BIR Ruling No.031-99 dated March 19,1999)

Accordingly, this Office hereby confirms your opinion that --

1. The transfer or reversion of the Club Floon's, subject matter of the trust

subject to income tax and consequently to withholding tax and the arrangement,by PRCas the Trusteeto SSSand PPC,as the Trustors,is not corresponding documentary stamp tax."

2. The properties subject matter of the trust arargement between PTRC, Sss the properties held in trust is not subject to the 12% VAT. and PPC are not held primarily for sale tol customers or for lease in the manages the said properties for the benefit of the trustor-beneficiary ordinary course of trustee's business, since the trustee merely holds or Consequently, the transfer or return by the trustee to the trustor-beneficiary of

3. Finally, the transfer or return by the trustee t the trustor-beneficiary of the is not subject to donor's tax.(BIR Ruling No. DA-411-04 dated July 29,2004 properties which are founded solely on the ternination of the trust agreement

to the tax consequence of the assignment by PPC to SSS-of its undivided interest, rights It should be emphasized, however, that the above-stated opinion does not pertain

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assignment may also be subject to the payment of appropriate taxes Income Tax,V. T and obligations to the Club Floors pursuant to the MOA dated September 9,1997,which and DST), unless the same had already been paic and settled.

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

a8 Yery truly yours.

Comir.issioner of Internal Revenue CAESAR R.DULAY 0521 1 6

K- gps(philam tower)