December 20, 1993

BIR RULING NO. 498-93

TRANSFER OF PROPERTIES TO STOCKHOLDERS AS PROPERTY

DIVIDENDS NOT TAXABLE

50 (b) 130-89 498-93

Pastelero Law Office

Third Floor, Universal Reinsurance Bldg.
106 Paseo de Roxas, Makati
Metro Manila
Attention: Atty. Antonio C . Pastelero

This refers to your letter dated June 24, 1991, requesting con rmation of your
opinion that the proposed transfer by your client, Libra Agro-Industrial Development
Corporation of real properties to their stockholders by way of property dividend, is
exempt from the payment of the following: prcd

a) The 5% creditable withholding tax prescribed under Revenue Regulations

No. 1-90; and
b) Documentary stamp tax imposed under Section 196 of the Tax Code.
It is represented that on November 5, 1990, your client declared property
dividends to all stockholders of record as of November 15, 1990; that among the
properties declared as dividend were parcels of land; that said property dividend was
approved by the Securities and Exchange Commission on December 17, 1990; that the
Deeds of Assignment covering the transfer of the said parcels of land to the
stockholders will be executed after receipt of the con rmation being requested; and
that you are of the opinion that since the law does not recognize any gain or loss
whenever property is transferred by a corporation to its stockholders by way of
dividend but instead defers the tax consequences upon the subsequent sale or
disposition of the property, no withholding tax is necessary at the date of the transfer
of the property or property dividend and the Deed of Assignment is not subject to
documentary stamp tax because conveyance without consideration is not taxable.
In reply, please be informed that under Section 21(c) (2) of the Tax Code, as
amended, dividends received from a domestic corporation and the share of an
individual partner in a partnership subject to tax under Section 24(a) shall be taxed at
the rate of 15% in 1986; 10% effective January 1, 1987; 5% effective January 1, 1988;
and 0% effective January 1, 1989.
Such being the case, your opinion that since your client, Libra Agro-Industrial
Development Corporation declared on November 5, 1990 property dividend to all its
stockholders of record as of November 15, 1990, the said property dividend is no
longer subject to income tax and consequently to the creditable expanded withholding
tax imposed under Revenue Regulations No. 1-90, implementing 50(b) of the Tax Code,
as amended, is hereby confirmed.

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 Moreover, under Section 185 of Regulations No. 26, as amended, otherwise
known as the Documentary Stamp Tax Regulations, conveyances of realty, not in
connection with a sale, to trustees or other persons without consideration are not
taxable.
In view thereof, and considering that the proposed transfer of the said property
dividend to the stockholders of your client is not in connection with a sale or its sale
and the same is without any monetary consideration, this O ce likewise con rms your
opinion that the Deed to be executed to effect the transfer of such property dividend to
the stockholders of your client is not subject to the documentary stamp tax imposed
under Section 196 of the Tax Code, as amended. The acknowledgment however, of said
Deed of Conveyance is subject to the documentary stamp tax (P3.00) on certi cates
pursuant to Section 188 of the Tax Code. LLphil

LIWAYWAY VINZONS-CHATO
Commissioner of Internal Revenue

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