BIR Ruling [DA-275-00]

July 5, 2000 BIR RULING [DA-275-00] 24; 83-99; DA-275-2000 Ms. Patricia A. Sto. Tomas Room 313, Philippine Social Science Center Commonwealth Avenue, Quezon City M a d a m : This refers to your letter received by this Office on January 25, 200 requesting in effect, for exemption from the payment of capital gains tax. You stated that sometime in August, 1999, a certain Ms. Jenette Sarmiento offered to sell her rights to Unit 521 of the Cityland Pioneer Condominium as she was in arrears and was due for foreclosure that after negotiation, you paid her P350,000 and promised to assume her monthly amortization payments of P17,713.75 until the year 2004; that you also started paying her association dues; that when you presented your deed of sale to Cityland Pioneer, they refused to transfer the unit to your name unless you pay the capital gains tax of P82,717.85; and that they claim that this is a new BIR regulation. In view of the foregoing, you now request for clarification on the above subject matter and exemption from the payment of capital gains tax. In reply, please be informed that assignment of rights in real property is not subject to the capital gains tax under Section 24(D)(1) of the Tax Code of 1997 because the assignee merely steps into the shoes of the assignor without acquiring a better right than what the assignor had in the property to which the right assigned pertains. Considering also that the title or ownership over the property in this case still remains with the developer, there is deemed no disposition of real property subject to capital gains tax. However, any gain realized by Ms. Jenette Sarmiento from and as a consequence of such assignment is subject to income tax. Moreover, the Deed of Assignment is subject to the documentary stamp tax of P15.00 imposed under Section 188 of the Tax Code of 1997. LibLex However, upon your full payment of the contract price, the developer (Cityland) shall thereby execute a Deed of Absolute Sale in your favor so that the Condominium Certificate of Title (CCT) will be registered under your name, but only upon your remittance and payment of the applicable creditable withholding tax to an authorized agent bank as provided under Sec. 2.57.2(J) of Rev. Regs. No. 2-98, as amended by Rev. Regs. 8-98, based on the entire consideration contracted to be paid for such realty or on its fair market value on the date of the execution of the Deed of Absolute Sale, whichever is higher. Furthermore, the said Deed of Absolute Sale conveying the subject condominium unit in your favor shall be subject to the documentary stamp tax imposed under Sec. 196 of the Tax Code of 1997, using the same tax base as above-stated (BIR Ruling No. 83-99 dated June 22, 1999) 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 null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) LILIAN B. HEFTI Deputy Commissioner Legal & Inspection Group