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BIR Ruling DA-C-179 464-09 (18 August 2009)
BIR Ruling DA-C-179 464-09 (18 August 2009)
Gentlemen :
This refers to your letter dated July 29, 2009 requesting for
confirmation of your opinion that the assignment of rights over a real
property is not subject to creditable withholding tax or capital gains tax
since the assignment did not result to any gain on the part of the assignor
Northwinds Prime Properties, Inc. and said transaction is likewise not subject
to VAT and documentary stamp tax (DST) under Section 196 of the NIRC of
1997 since there was no conveyance of real property but only an
assignment of rights.
Background
On November 28, 1995 ADR Farms, Inc. ("ADR") and Northwinds Prime
Properties, Inc. ("Northwinds") entered into a Memorandum of Agreement
("MOA") to evidence their agreement to the effect that the Vendor will sell to
the Vendee a parcel of land situated in Barrio Lugam, Malolos, Bulacan
covered by TCT No. T-52755, containing an area of 546,349 square meters
for an aggregate amount of One Hundred Twenty Million One Hundred
Ninety Six Thousand Seven Hundred Eighty Pesos (P120,196,780.00) subject
to the terms of payments and other conditions as agreed by the
aforementioned parties.
Then on February 13, 2006, Northwinds assigned its rights over the
above-mentioned MOA in favor of Crown Communities (Bulacan), Inc.
("Crown Bulacan") through a Deed of Assignment whereby Northwinds
assigned, transferred and conveyed all of its rights, title and interest in, to
and under the MOA in favor of Crown Bulacan. In exchange therefor, Crown
Bulacan pays Northwinds the sum of Thirty Five Million Pesos
(P35,000,000.00), which is equivalent to the total amount actually paid by
Northwinds to the vendor ADR. CDAEHS
Further, in BIR Ruling No. DA-107-00 dated February 18, 2000, this
Office granted a taxpayer's request for exemption from the payment of the
6% capital gains tax in a case where there was an assignment of rights by a
corporation-vendee in favor of certain individuals over a condominium unit
while title to the same remained with the vendor-developer. It was ruled that
in such sale of right over land/buildings, the vendor-developer is not subject
to the capital gains tax imposed under Section 27 (D) (5) of the Tax Code of
1997 and to the CWT imposed under Section 57 (B) nor to the DST
prescribed under Section 196 of the same Code. However, the Deed of
Assignment of Rights is subject to the P15.00 DST on the notarial
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acknowledgment on said Deed.
On the basis of the foregoing BIR Rulings, it is clear that the Deed of
Assignment by and between Northwinds and Crown Bulacan involving
transfer of rights to real property is not subject to the 6% capital gains tax
under Section 27 (D) (5) of the Tax Code of 1997, as amended, nor to the
creditable withholding tax under Revenue Regulations No. 2-98, as
amended, nor to the VAT and DST under Sections 106 and 196, both of the
Tax Code of 1997 since the Deed of Assignment is not considered a sale of
realty because what is conveyed is not the property itself but the rights
pertaining to such property. The assignee (Crown Bulacan) merely steps into
the shoes of the assignor (Northwinds) without acquiring a better right than
what the assignor had in the property to which the assigned right pertains.
However, the said Deed of Assignment is subject to the P15.00 DST on the
notarial acknowledgment imposed under Section 188 of the Tax Code of
1997, as amended.
Accordingly, this Office hereby confirms your opinion that the
assignment of rights over a real property is not subject to creditable
withholding tax or capital gains tax since the assignment did not result to
any gain on the part of the assignor Northwinds Prime Properties, Inc. and
said transaction is likewise not subject to VAT and documentary stamp tax
(DST) under Section 196 of the NIRC of 1997 since there was no conveyance
of real property but only an assignment of rights.
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.
cHCaIE