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APIC DA-139-2004
Gentlemen :
This refers to your letter dated February 2, 2004 requesting for a ruling that the
transfer of real properties by the Spouses Condrado and Sergia Estrella in favor of
Rural Bank of Rosales, Inc. (ROSBANK) representing additional infusion of capital
in the nature of paid-in surplus is not subject to the capital gains tax imposed under
Section 24 of the Tax Code of 1997.
P49,609,000.00
In reply, please be informed that under Section 24(D)(1) of the Tax Code of
1997, a final tax of six percent (6%) based on the gross selling price or current fair
market value as determined in accordance with Section 6(E) of the same Code,
whichever is higher, is imposed upon capital gains presumed to have been realized
from the sale, exchange, or other disposition of real property located in the
Philippines, classified as capital assets, including pacto de retro sales and other forms
of conditional sales, by individuals, including estates and trusts. The 6% final tax is
still imposed despite the fact that a transfer of property is made for a legitimate
business purpose and without monetary consideration. 1 This is so because the
foregoing tax is based on the capital gains presumed to have been realized by the
taxpayer on the said transfer transaction. Such being the case, the transfer of the
above-listed real properties to ROSBANK by stockholders Condrado and Sergia
Estrella, as contribution to its capital, is subject to the 6% capital gains tax herein
imposed.
Finally, Section 185 of Revenue Regulations No. 26, otherwise known as the
"Documentary Stamp Tax Regulations" provides that
Considering that Condrado and Sergia Estrella transferred the above-listed real
properties without the corresponding issuance of additional shares of stock in their
favor, the foregoing will be considered as contribution of additional paid-in capital,
not subject to documentary stamp tax as the above conveyances of realties are without
any consideration and are not made in connection with a sale. (DA-139-2004 dated
March 26, 2004 citing DA-150-03 dated May 7, 2003)
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.