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BIR RULING NO. 028-02: KNECHT, Incorporated
BIR RULING NO. 028-02: KNECHT, Incorporated
KNECHT, Incorporated
Room 508, J & T Building
Magsaysay Boulevard, Sta. Mesa
Manila
Gentlemen :
and that the properties involved are three (3) parcels of land covered by
Transfer Certificates of Title Nos. 286176 located at Sto. Domingo, Cainta,
Rizal, 286174 and 256175, both located at San Joaquin, Pasig, Metro Manila,
are registered at the moment in the name of Philippine Commercial and
Industrial Bank.
Based on the foregoing, you now, in effect, request for exemption from
income tax and consequently from the withholding tax, as well as
documentary stamp tax imposed under Section 196 of the Tax Code, as
amended.
In reply, please be informed that, since the Deed of Conveyance was
executed on February 13, 1989, the pertinent provisions of the Tax Code
obtaining at that time shall apply.
On the other hand, if there are still creditors, such creditors have
preference over the corporate assets of Rose Packing Company, Inc., vis-à-
vis its shareholders, and therefore, the shareholders who are individuals are
not yet deemed to be in receipt of their respective share in the net assets of
the corporation. If that is the case, the transfer of the 3 parcels of land
pursuant to the Deed of Conveyance is indeed a mere transfer to a trust,
which would not be subject to the income tax, withholding tax, nor to the
documentary stamp tax on conveyances of real property. The notarial
certification, however, would be subject to the documentary stamp tax of
Ten Pesos (P10.00) pursuant to then Section 188 of the Tax Code, as
amended. The shareholders themselves become subject to income tax on
the liquidating gains, if any, once the liabilities of the trust are settled and
there is no impediment to the distribution of the net assets of the trust,
whether or not there is in fact an actual distribution of such assets.
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For purposes of issuing a certificate authorizing registration, this Office
takes note of later rulings to the effect that a corporation that distributes its
assets in liquidation, is not subject to the creditable withholding tax, since
such distribution does not constitute a sale of such assets. Thus, it has been
held that the conveyance by a corporation of parcels of land as liquidating
dividends is not subject to the creditable withholding tax on sales,
exchanges or transfers of real property under then Revenue Regulations No.
1-90. (BIR Ruling No. 270-91 dated December 23, 1991) At any rate, at the
time of the transaction in question, there was no withholding tax on transfer
or disposition of real property. In addition, the transfer of real property as
liquidating dividends to the shareholders of a corporation is not subject to
documentary stamp tax on conveyance of real property. (BIR Ruling No. 059-
90 dated April 17, 1990 cited in BIR Ruling No. 092-99 dated July 8, 1999)
Accordingly, a certificate authorizing registration covering properties,
which at the moment, are in the name of PCIB may be issued without the
payment of expanded withholding tax and documentary stamp tax.
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 as null and void.