Bir Ruling Un 041 95

January 20, 1995

BIR RULING [UN-041-95] Atty. Carlos A. Lardizabal 817 EDSA, South Triangle Quezon City, Metro Manila Sir: This refers to your letters dated August 4, 1993 and December 30, 1994 requesting on behalf of your client, MS. LEONORA F. PASCUAL, for a ruling based on the following representation of facts: cdasia

"LEONORA F. PASCUAL, has established a revocable inter vivos trust and would like to change the manner of holding title to her real properties and stocks and securities from LEONORA F. PASCUAL, to LEONORA F. PASCUAL, Trustee (and subsequent trustees), L. F. PASCUAL TRUST." "This is a revocable trust under Sec. 56 of the NIRC and the transfer of the properties into the trust is a non-taxable event and not subject to documentary stamp tax. During her lifetime, she is a trustor, trustee and beneficiary and hold all incidents of ownership."

In reply, please be informed that under Section 21 (e) of the Tax Code, as amended, capital gains presumed to have been realized from the sale, exchange or other disposition of real property, located in the Philippines classified as capital asset, including pacto de retro sales or other forms of conditional sales, by individuals, including estates and trust shall be taxed at the rate of 5% based on the gross selling price or the fair market value prevailing at the time of sale, whichever is higher. Such being the case, and considering that there is no actual transfer of ownership over the aforementioned properties as a result of the transfer thereof to LEONORA F. PASCUAL, Trustee (and subsequent trustees), L.F. PASCUAL TRUST, the said transfer is not subject to the 5% capital gains tax under Section 21 (e) of the Tax Code, as amended, and consequently, not also subject to the expanded creditable withholding tax prescribed under Section 50 (b) of the Tax Code, as implemented by Revenue Regulations No. 6-85 as amended by Revenue Regulations Copyright 2014

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Philippine Taxation Encyclopedia 2013

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No. 12-94. Moreover, the deed conveying the aforementioned properties to LEONORA F. PASCUAL, Trustee (and subsequent trustees), L.F. PASCUAL TRUST is not subject to documentary stamp tax imposed by Section 196 of the Tax Code, but the notarial acknowledgment is subject to the documentary stamp tax of P10.00 under Section 188 of the same Code, as amended. It shall be understood in this connection, that property placed in revocable trust is includible in the trustor's gross estate for estate tax purposes. Even if the trustor is incompetent and cannot legally exercise the power of revocation, mere possession at death of the power to revoke shall cause the inclusion of the properties held in trust in the trustor's estate. Accordingly, the creation of a revocable living trust does not directly affect the amount of estate tax payable at the trustor's death. In view thereof, the aforementioned real properties, stocks and securities may now be registered by the Registry of Deeds concerned and the Securities and Exchange Commission, respectively, in the name of LEONORA F. PASCUAL, Trustee (and subsequent trustees), L.F. PASCUAL TRUST. This ruling is being issued on the basis of the foregoing facts as represented. However, if it will be discovered upon investigation that the facts are different, then this ruling shall be considered null and void from the date of issue. (BIR Ruling No. 086-92 dated March 19, 1992; UN-130-94, and UN-129-94 both dated April 11, 1994) cdtech

Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service)

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CD Technologies Asia, Inc. and Accesslaw, Inc.

Philippine Taxation Encyclopedia 2013

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