Office of the Municipal Mayor

January 5, 2007 BIR RULING [DA-004-07] 24 (D) (1); 196; DA-399-2004 Office of the Municipal Mayor Municipality of Limay Province of Bataan Attention: Hon. Nelson C. David Municipal Mayor Gentlemen : This refers to the 1st Indorsement of Atty. Jose Ric A. Cabrera, Chief, Legal Division, Revenue Region No. 4, San Fernando, Pampanga dated August 31, 2006, relative to the letter request of Mayor Nelson C. David, requesting exemption from the payment of capital gains tax, documentary stamp tax and donor's tax. It is represented that the Municipality of Limay, Bataan is in the process of transferring the Title (T95662 of RD of Bataan) to Lot 1 of consolidation of Lots 491-C and 491-D at Bliss, Limay, Bataan from the Ministry of Human Settlements to the Municipality of Limay, Bataan; that the property was donated by the Municipality of Limay to the Ministry of Human Settlements and Bliss Development constructed the Housing Project; that with its liquefication program, the housing units were sold to the Municipality of Limay and the title was reconveyed by virtue of a Deed of Reconveyance under Doc. No. 472, Book No. 91, Page 11, series of 1996, notarized by Atty. Roberto C. Abrojano; and that since this is a transaction between government agencies, exemption from the payment of capital gains tax, documentary stamp tax and donor's tax is requested. 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 assets, including pacto de retro sales and other forms of conditional sales by individuals, including estates and trusts, 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. TIaCcD In the instant case, since the transaction is without any monetary consideration, and considering further that the execution of the Deed of Reconveyance was not for monetary consideration, the same is not subject to the capital gains tax, imposed under Section 24(D)(1) of the Tax Code of 1997, nor to the withholding tax imposed under Revenue Regulations No. 2-98. ASTIED Furthermore, the said Deed of Reconveyance is not subject to the documentary stamp tax on deeds of sale and conveyances of real property imposed under Section 196 of the Tax Code as amended by Republic Act No. 9243, but only to the documentary stamp tax on certificates issued by a notary public under Section 188 of the same Tax Code. (BIR Ruling No. DA-399 dated June 29, 1998) CHTAIc Granting that the reconveyance of the subject properties qualifies as a donation, the same is likewise exempt from the imposition of donors tax pursuant to Section 101(A)(2) of the same Tax Code, viz: "Sec. 101. Exemption of Certain Gifts . The following gifts or donations shall be exempt from the tax provided for in this Chapter: (A) In the Case of Gifts Made by a Resident. xxx xxx xxx (2) Gifts made to or for the use of the National Government or any entity created by any of its agencies which is not conducted for profit, or to any political subdivision of the said Government; xxx xxx xxx This ruling is being issued on the basis of the foregoing facts are represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling will be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service