BIR Ruling [DA-208-05]

April 26, 2005 BIR RULING [DA-208-05] Section 58 (E); BIR Ruling No. 138-91 Mr. Cresencio P. Dela Cruz Block 6 Lot 34 Tiera Grande Royale Manggahan, General Trias Cavite City S i r : This refers to your request that you be allowed to pay fifty percent (50%) of the capital gains tax (CGT) and documentary stamp tax (DST) on the sale of real property located at Block 6 Lot 34 Tierra Grande Royale, Manggahan, General Trias, Cavite City; and that thereafter, you be issued the Certificate Authorizing Registration (CAR) to enable the Registry of Deeds of Cavite to process the Transfer Certificate of Title (TCT) in your name. It is represented that you acquired the aforementioned property through a housing loan offered by your company; that the company required that you submit the TCT in your name; that your savings were not enough to pay the taxes thereon; and that you desire to settle the remaining balance on installment basis. In reply, please be informed that insofar as this Office is concerned, the CAR is issued, as a matter of course, upon due verification that the proper taxes have already been paid by the concerned party/ies to the transaction. The Section 58(E) of the Tax Code of 1997 provides, viz: "(E) Registration with Register of Deeds . No registration of any document transferring real property shall be effected by the Register of Deeds unless the Commissioner or his duly authorized representative has certified that such transfer has been reported, and the capital gains or creditable withholding tax, if any, has been reported, and paid: Provided, however, That the information as may be required by rules and regulations to be prescribed by the Secretary of Finance, upon recommendation of the Commissioner, shall be annotated by the Register of Deeds in the Transfer Certificate of Title or Condominium Certificate of Title . . . Provided, finally, That any violation of this provision by the Register of Deeds shall be subject to the penalties imposed under Section 269 of this Code." Moreover, Section I(1) of Revenue Memorandum Order No. 66-99 provides that "I. No CAR shall be issued by the Revenue District Officer unless: 1. The original copy of the OR(s) evidencing payment of the corresponding tax(es) for the transaction and deficiency tax, if any, is presented to the Revenue Officer together with the complete documentary requirements necessary for the processing of the return; 2. ..." The requirements for the issuance of the CAR are limited to the reporting of the transaction transferring the real property, and paying the taxes imposed on such transactions. Hence, it is necessary that the taxes first be paid before the CAR can be issued. Accordingly, this Office cannot issue the CAR which authorizes the Register of Deeds of Cavite to transfer the TCT in your name unless the corresponding CGT and DST have been paid. On the matter of whether or not you can pay 50% of the CGT, Section 2 of Revenue Regulations No. 13-85 implementing then Section 21(b) (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. This Office recognizes the validity of the agreement between the sellers and the buyer whereby the latter assumed the payment of all transfer taxes as having the force of law between the parties. However, Section 204(A)(2) of the Tax Code of 1997 is for the benefit of the person liable under the law to pay the tax. Under the law it is the seller who is liable to pay the capital gains tax. It appears that the financial position of the seller does not demonstrate a clear inability to pay the assessed tax. Accordingly, there is no basis for compromise insofar as the seller is concerned. To rule otherwise would provide an opportunity for circumventing the law. SaAcHE In view of the foregoing, we regret to inform you that your request to pay fifty percent (50%) of the CGT and DST on the sale of the aforementioned property is hereby denied for lack of legal basis. 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 as null and void. Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group