October 23, 2008

BIR RULING [DA-(C-104) 328-08]

27 (D) (5); 196; 2-98; 054-2000;

174-90

Home Development Mutual Fund

Pag-IBIG Fund/WT Corporate Tower
Mindanao Avenue, Cebu Business Park
Cebu City

Attention: Mr. Antonio C. Enriquez

Branch Manager

Gentlemen :

This refers to your letter dated April 11, 2007 requesting confirmation of your
opinion that the Deed of Assignment executed by and between the National Home
Mortgage and Finance Corporation (NHMFC) and Home Development Mutual Fund
(HDMF) for the purpose of transferring the rights and interests over the real estate
mortgages to HDMF is not subject to the capital gains, withholding and documentary
stamp taxes.

The facts as represented are as follows:

On April 24, 1997, a Deed of Assignment was executed by NHMFC, a

government owned and controlled corporation organized under Presidential Decree
(P.D.) 1207, in favor of HDMF, also a government owned and controlled corporation
organized under P.D. 1752, whereby NHMFC assigned and transferred to HDMF all
its rights and interests over the real estate mortgages executed by the
buyers-beneficiaries prior to loan take-out to secure their individual loan accounts
with NHMFC, in relation to their purchases of socialized housing units with the
various project originators, in accordance with the Memorandum of Agreement
(MOA) NHMFC and HDMF executed on July 24, 1996; that pursuant to the MOA,
HDMF shall take-out an estimate of P7.5 Billion worth of housing loan from various
originators under its Unified Home Lending Program (UHLP); and that in relation
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 thereto, NHMFC commits to assign to HDMF all the mortgages subject to take-out
including, among others, P2,616,705.00 covered by the above April 24, 1997 Deed of
Assignment. ICacDE

In reply, please be informed that pursuant to Sections 2.57-1 (A) (6) and 2.57.2
(J) of Revenue Regulations No. 2-98, as amended, implementing Sections 24 (D) (5)
and Section 57 (A) and (B) of the Tax Code of 1997, as amended, a final or creditable
withholding tax is imposed on the sale, exchange or disposition of real property
located in the Philippines classified as capital assets and ordinary assets, respectively.

From the foregoing, it is clear that only sales, exchanges or transfers of real
properties are subject to the final or the creditable withholding tax imposed under
Sections 24 (D) (5) and 57 (B) of the Tax Code of 1997, as amended, and as
implemented by Revenue Regulations No. 2-98, as amended; hence, assignments of
rights and interests over real estate mortgages which are not considered as real
property as defined under Article 415 of the Civil Code of the Philippines are not
included within the purview of the said regulations.

Moreover, a Deed of Assignment is not a Deed of Sale because what is

conveyed by the assignor is not property itself but the rights pertaining to such
property or arising thereto. Accordingly, the above Deed of Assignment executed by
NMHFC in favor of HDMF, whereby NHMFC assigned and transferred to HDMF its
rights and interests over the real estate mortgages it instituted on the socialized
housing units prior to loan take-out, is not subject to capital gains, withholding and
documentary stamp taxes imposed under Sections 27 (D) (5), 57 (B) and 196, of the
Tax Code of 1997, as amended. (BIR Ruling No. 054-2000 dated January 31, 2000
citing BIR Ruling No. 174-90 dated September 10, 1990).

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

Very truly yours,

Commissioner of Internal Revenue

By:

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 (SGD.) JAMES H. ROLDAN
Assistant Commissioner
Legal Service
Bureau of Internal Revenue

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