BIR Ruling [DA-200-05]

April 21, 2005 BIR RULING [DA-200-05] Section 24 (D) (1) Mr. and Mrs. Alvin F. Penuliar 7-B JP Ramoy St. Talipapa, Novaliches Quezon City M a d a m : This refers to your letter dated February 10, 2004 requesting for a ruling that the sale to you by the original buyer of a housing unit of the housing project known as La Trinidad Village Project, registered as a community association with the Home Financing Corporation, is not subject to capital gains tax. In reply, please be informed that in all cases involving sale, exchange or any disposition of real property, classified as capital assets, including pacto de retro sales and other forms of conditional sales, located in the Philippines, 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 Tax Code of 1997, whichever is higher, shall be imposed upon capital gains presumed to have been realized pursuant to Section 24(D)(1) of the same Code. BIR Ruling No. 153-91 dated August 16, 1991, which you rely upon as your basis for exemption from capital gains tax does not apply to you. In the aforementioned ruling, this Office ruled that the sale in favor of the individual tenant members of the subdivided property is not subject to capital gains tax for the reason that the sale of the aforesaid property is without any consideration since it is merely a formality to finally effect transfer of title to the said property to the tenant-members who actually bought the same on installment basis from the seller through the representative association. The sale is without any consideration because what is being sold is a property, the ownership of which already belongs to the buyers. In contrast, the sale to you by Alex Villanueva Laynes of a housing unit of the housing project is subject to a monetary consideration and what was sold to you is a property, the ownership of which does not belong to you. Moreover, Section 2 of Revenue Regulations No. 13-85 implementing then Section 21(b) of the old Tax Code (now Section 24(D)(1) of the Tax Code of 1997) provides that the person liable to pay the capital gains tax is the seller or the person who is presumed to have realized an income or gain from the transaction. However, this Office recognizes the validity of the agreement between the seller and the buyers whereby the latter assumed the payment of all transfer taxes as having the force of law between the parties (cited in BIR Ruling No. 007-02 dated February 14, 2002). Nevertheless, in the absence of an exempting provision, this Office cannot exempt your aforesaid purchase of real property from the CGT imposed under Section 24(D)(1) of the Tax Code of 1997. In BIR Ruling No. 052-97 dated April 14, 1997, this Office, quoting the Supreme Court said that it is a well-settled rule that he who claims exemption should prove by convincing proofs that he is exempted ( Visayas Cebu Terminal Co., Inc. vs. Commissioner , L-19530 and L-19444, February 27, 1965). An exemption from the common burden cannot be permitted to exist upon vague implications ( Asiatic Petroleum Co. vs. Llanas , L-28731 and L-28902, March 29, 1979). In view of the foregoing, your request cannot be granted for lack of legal basis. The sale to you by the original buyer of a housing unit of the housing project known as La Trinidad Village Project, registered as a community association with the Home Financing Corporation, is subject to capital gains tax. STHAaD Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group