BIR Ruling No. 627-2020

BUREAU OF INTERNAL REVENUE REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE Quezon City

Sec. 27(D)(5),NIRC of 1997, as amended BIR Ruling No.779-2018 QT0627-2020 NOV U 3 ZO20

MISSIONARY SOCIETY OF ST.COLUMBAN Manila 1857 Singalong Street

Attention: Father Paul Glynn SSC Regional Director

Gentlemen:

reconveyance of real property from the Roman Catholic Archbishop of Manila to the Regional Director of the Missionary of St. Columban in the Philippines, Incl. This refers to your letter dated July 2, 2020 requesting for tax exemption on the

could own a real property in the Philippines, Society of St. Columban asked the Roman No. 55 Twin Hills St., Rolling Hills Subdivision, New Manila, Quezon City, covered by Catholic Archbishop of Manila to place under its name the said property, to which the latter agreed. Thus, a Deed of Trust was executed in April 18, 1988. land with improvement from Mrs. Violeta Ymzon Bondoc and her six (6) children located at Transfer Certificate of Title (TCT) No. As represented, on April 18, 1988, the Society of St. Columban acquired a parcel of . However, because of doubts as to whether it

Missionary of St. Columban in the Philippines, Inc. conveying unto the latter the said parcel Archbishop of Manila for the reconveyance of the above-mentioned parcel of land and its improvement, to which the latter agreed. Therefore, on March 4, 2020, the Roman Catholic of land [TCT No. Archbishop of Manila executed a Release of Trust in favor of the Regional Director of the On October 10, 2019, the Society of St. Columban requested the Roman Catholic 1 and its improvement (TD No. and Tax Declaration (TD) No. +. Hence, this request.

In reply, please be informed that Section 27(D)(5) of the Tax Code of 1997, as amended, provides, viz:

"SEC. 27. Rates of Income tax on Domestic Corporations.

XXx XXx xXx

Formerly: The Missionary Society of St. Columban in the Philippines, Inc.

01327-2U4U NOV"0 3 2020

(D) Rates of Tax on Certain Passive Incomes.

XXX XXX XXX

such lands and/or buildings. or disposition of lands and/or buildings which are not actually used in the business of a corporation and are treated as capital assets, based on the gross selling price of fair market value as determined in accordance with Section 6(E) of this Code, whichever is higher, of Disposition of Lands and/or Buildings. - A final tax of presumed to have been realized on the sale, exchange (5) Capital Gains Realized from the Sale, Exchange or six percent (6%) is hereby imposed on the gain

considering that the reconveyance is ostensibly just for return of the property to the legal ownership over the property in the name of the Regional Director of Missionary of St. business of the corporation and are treated as capital assets shall be taxed at the rate of 6% based on the gross selling price or the fair market value thereof, whichever is higher. In the as a continuation and confirmation of title in favor of the ultimate and real beneficiary of the owner and merely acknowledges, confirms and consolidates the legal title and beneficial by the Trustee in favor of the Trustor of the subject properties which the former acquired by the sale between the original owner and the Trustee. The conveyance is merely to be treated subject properties. Likewise, the transaction is not predicated by a valuable consideration Columban, the Trustor. the sale, exchange, or disposition of lands and/or buildings which are not actually used in the instant case, however, there is no sale, exchange or disposition of real property involved since the Regional Director of Missionary of St. Columban is the real owner of the subject realty, while Roman Catholic Archdiocese of Manila merely acted as trustee. The conveyance virtue of the Deed of Trust is not to be treated as another transfer separate and distinct from Under the above-quoted provision, capital gains presumed to have been realized from

tax prescribed in Revenue Regulations (RR) No. 2-98, as amended, implementing Section 57 the Trustor, who is the beneficial owner thereof, is not subject to capital gains tax imposed under Sec. 27 (D)(5) of the Tax Code of 1997, as amended or to the creditable withholding (B) of the Tax Code of 1997, as amended.2 Accordingly, the transfer of title of the afore-stated properties by the Trustee in favor of

realty sold shall be granted, assigned, transferred, or otherwise conveyed to a purchaser or documents subject to the documentary stamp tax (DST) imposed therein are those where the Moreover, under Section 196 of the Tax Code of 1997, as amended, the deeds or

purchasers or to any other person or persons designated by such purchaser or purchasers, thereby excluding from its purview the instant case considering that the supposed purchaser is actually the owner thereof. Also, under Section 191 of RR No. 26, otherwise known as the

Documentary Stamp Tax Regulationsconveyancesto a trust without valuable consideration, or from a trustee to a cestui que trust without valuable consideration are not subject to tax. Since the reconveyance of the afore-stated properties by the Trustee in favor of the Regional Director of Missionary of St. Columban is a transfer of ownership to the real

2 BIR Ruling No. 779-2018 dated May 8, 2018

UI-Us2I-e46u NOV 0 3 2020

owner thereof in connection and in recognition of a trust, the said transfer, therefore, is not Subject to the DST imposed under Section 196 of the Tax Code of 1997, as amended. as imposed under Section 188 of the same Code. However, the notarial acknowledgment to the Release of Trust is subject to the P30.00 DST

the increase in the patrimony of the donee, and (3) the intent to do an act of liberality (animus donandi). In this case, however, there is no intention to donate on the part of the Trustee since Hence, the transfer of the properties to the Regional Director of Missionary of St. Columban by the Trustee is exempt from the donor's tax imposed under Section 98 of the Tax Code of is generally imposed on the transfer by any person, resident or non-resident, of property by gift. The donor's tax applies, whether such transfer is in trust or otherwise, whether the gift is direct or indirect, and 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 reconveyance merely transfers the ownership of the subject realty to the true buyer/owner. 1997, as amended Furthermore, Section 98 of the Tax Code of 1997, as amended provides that donor's tax

realty is not held primarily for sale to customers or for lease in the ordinary course of business.3 Finally, the reconveyance is not subject to value-added tax (VAT) because the said

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,

Masau1a

Commissioner of Internal Revenue CAESAR R. DULAY

037475

3 BIR Ruling No. 779-2018 dated May 8, 2018