BIR Ruling [DA-249-96]

July 17, 1996 BIR RULING [DA-249-96] Atty. Wencito F. Yap, C.P.A. 3/F Gonzaga Building 414 Rizal Avenue Sta. Cruz, Manila S i r : This refers to your letter dated July 5, 1996 stating that your client, Adrian T. Yu, is the registered and lawful owner of a parcel of land with an existing semi-concrete house located at the corner of E. Rodriguez Blvd. and Cordillera St., Galas, Quezon City covered by Transfer Certificate of Title No. 155194; that recently, your client, contemplated in selling the aforementioned property to Arisman Development Corporation for Five Million Five Hundred Thousand Pesos (P5,500,000.00), with the understanding that the existing Real Estate Mortgage (REM) with the Bank in the amount of Twenty Million Pesos (P20,000,000.00) shall first be settled by him and the corresponding REM cancelled/released before the buyer pays the price; that to date, the valuation of the said properties, are as follows: BIR Zonal Valuation : Cordillera St. (530.4 sq. m. @ P2,500.00) = P1,326,000.00 Rodriguez Blvd. (530.4 sq. m. @ P9,000.00) = P4,773,600.00 Market Value per tax declaration Land (530.4 @ 380 P201,550.00 Improvement 76,910.00 Total P278,460.00 ========= and that your client is not engaged in realty business. Based on the foregoing representation, you now request for a ruling as to the capital gains tax and documentary stamp tax liability of your client in the intended sale, showing in particular the taxable base. 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 estate and trusts, shall be taxed at the rate of 5% based on the gross selling price or the fair market value (zonal value) prevailing at the time of sale, whichever is higher. Accordingly, the tax base to be used in computing the capital gains tax on the intended sale by your client shall be the gross selling price of P5,500,000.00, it being the highest. Moreover, in all cases involving sale, exchange, or any disposition of real property, the tax base for documentary stamp tax purposes shall be the same as the tax base used in the computation of the capital gains tax which means, gross selling price, fair market value, or zonal value of the real property, whichever is higher. (RMO No. 41-91) This serves as an authority for the Revenue District Officer concerned to compute the capital gains tax and documentary stamp tax on the intended sale based on this ruling. This ruling is being issued on the basis of the foregoing facts as represented. However, it upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. (BIR Ruling No. 101-92 dated March 20, 1992) Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service) By: ALICIA L. TOMACRUZ Head, Revenue Executive Assistant (Legal Service)