BIR Ruling No. 483-2017

REPUBIIC OI tHE PHLIPPINES

DEPARIMENT OF FINANCE BURFAU OF INTERNAL REVENUE

Quezon City

Scctions 27(C) S(the Tax (oxe of {997.as Rnended BIR Ruling No. 477 i1: BlR Ruling No. 308 j+

1.483-20 17 10-19-7T7

Date

MA.VICTORIA D.VERGEL de DIOS

DR. VICTORIANO R. POTENCIANO MEDICAL CENTER. INC President

163 FDSA. Malamig. Mandaluyong City 1550

Madam:

This refers to your letter dated May 27. 2016 requesting for legal opinion/clarification as to whether the sale of a parcel of land by the Government Service Insurance System (GS!S) to Dr. Victor R. Potenciano Medicat Center. Inc. is subiect to expanded withholding tax or capital gains tax .

Documents submitted disclosed that GSis is a social insurance institution created and exising pursuant to the provisions of' Commonweatth Act (CA) No. 186. as amended. and operating under its present Charter, Republic Act No. 8291. otherwise known as the GSIS Act ot

City, Philippines. It is registered owner of a parcel of land Jocated at No. 161 (BIk. 53. Lot 21-B). E. Delos Santos Avenue. Mandaluyong City. covered by T'ransfer Certificate Tille No. 1997. and with principal address at the GSIS headquarters Building. Financial C'enter Area Pasay O[ the Registry of Deeds for the Province of Rizal containing an area of four hundred ninety-five square meters (495sq. m.).

On the other hand. Dr Victor R. Potenciano Medical Center. Inc. with BIR Certificate of Registration No and Taxpayers Identification Number (TIN)

Registration No. Phitippines. registered with the Securities and Exchange Commission with SEC Company s a domcstic corporation dufy organized and existing under the laws of the Republic of the

On May 13. 2015. the GSIS executed a Deed of Absolute Sale transferring the

amount of documentary Stamp lax for the transaction was paid by Dr. Victor R. Potenciano Medical Center Inc. aforementioned property in favor of Dr. Victor R. Poteneiano Medical Center. Inc.. for the total Pesos (Php t. On June 4. 2015. the corresponding

483-2017 10-19-2017

DR.VICTOR R.POTENCIANO MEDICAL CENTER (VRPMC&GSIS Page 2

this Office ruled as follows: In reply.please be informed that in BIR Ruling No.477-2011.dated December 5.2011

Rafer for the total amount of above-described property in favor of the Spouses Eduardo C.Rafer and Gracita O. (Ph On July 8.2009.the GSIS executed a Deed of Absolute Sale transferring the

In reply, please be informed that in a similar case, this Office ruled as follows:

or exchange of property which is not a capital asset as defined in Section 39A1of the same Code (Section22Z,Tax Code of 1997 on the gain presumed to have been determined in accordance with Section 6(E of the Tax Code of 1997,as amended.whichever is higher of such lands and/or buildings (Section 27D5.Tax Code of 1997 However,when the land and/or buildings subject to sale,exchange or disposition are actually used in the business of a corporation and are classified as ordinary assets the transaction is subject to ordinary income,and not capital gains tax,which includes any gain from the sale owned by a corporation. which are not actually used in its business and are treated as capital assets. a final tax of six percent (6% is imposed ". in cases of sale, exchange or disposition of lands and/or buildings

On the other hand.Section 27C of the Tax Code provides as follows

the contrary notwithstanding. all corporations, agencies or their taxable income as are imposed by this section upon corporation or associations engaged in a similar business, industry or activity CGovernment-owned or controlled Corporations.Agencies or Instrumentalities-The provisions of existing special or general laws to instrumentalities owned or controlled by the Government Service Insurance System GSIS),the Social Security System (SSSthe Philippine Health Insurance Corporation PHIC.and the Philippine Charity Sweepstakes Office (PCSO.shall pay such rate of tax upon

disposition by a corporation of lands and/or buildings classified as capital assets ordinary assets,the burden of paying the 6% capital gains tax/ creditable withholding tax rests upon the seller/transferor because the latter is the one who realized the capital gains tax/ordinary income subject to tax, unless there is a stipulation to the contrary. It is clear from the foregoing provisions, that in cases of sale, exchange or

due on the sale transaction, it being the registered owner of the subject property. However. Section 27C of the Tax Code of 1997.as amended, provides,among In the instant case,GSIS is the one directly liable to pay the corresponding taxes

: 48320 17 10-19-2017

DR.VITOR R.POTFNCIANONHDNAI (FNEFR NRPNC)&GSIS Page 3

others. that GSIS is not liable to pay such rate of tax as are imposed on other domestic corporations which necessarily includes the payment of capital gains tax.

Wherefore. in view of the foregoing. this Office holds that the sale of the aforesaid 78 lots by GSIS to GMC is neither subject to income tax nor to capital gains tax . However. GMC. as Vendec. and which is not exempt from the payment of any tax arising from the above-mentioned transaction shall be the one liable to pay the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. as amended. (BIR Ruling No. 143.05 dated April 12, 2005 citing BIR Ruling No. DA-167.02 datced Scht cmhcr !?, 2(2

Applying the foregoing provisions of law and ruling, the sale ot' the above- described parccl of land by GSIS in favor of Spouses Fduardo C. Rafer and Gracita O). Rafer is not subject to capitat gains lax. However. Spouses Eduardo C. Rafer and Gracita O. Rafer shall he ones liable to pay the documentary stamp tax imposed under Section 196 of the Tax Code 1997. as amended."

From the foregoing. the sale of the abovementioned parcel of land by GSiS. a governmcnt- owned and controlled corporation. not engaged in real estate business. in favor of Dr. Victor R. Potenciano Medical Center Inc.. is not subject to expanded withholding tax. Nor is the transaction subject to capital gains tax as GSIS is an income tax-exempt corporation under the Tax Code

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

Very truly yours.

CAESAR R. DULAY Commissioner of Internal Revenue

K-}i t 010042