Mr. Levy C. Raquiza

May 2, 2007 BIR RULING [DA-284-07] 6 (E) DA-313-2003 Mr. Levy C. Raquiza 28 Ling Beach St., Merville Park Paraaque City S i r : This refers to your letter dated April 20, 2007 requesting in effect for a ruling on the correct tax base to be used in the computation of the capital gains tax and documentary stamp tax on your proposed sale of two (2) parcels of land. It appears that Levy C. Raquiza, married to Ma. Teresa Raquiza is the registered owner of 2 adjacent parcels of land covered by TCT Nos. T-98342 and T-98343 located at CAA Rd., Barangay Talon Tres, Las Pias City with a combined area of 17,680 sq.m. The aforestated lots are classified as "Industrial" in their Tax Declarations and have an aggregate Market Value of P35,360,000.00 which is P2,000.00 per sq.m., the Bureau of Internal Revenue (BIR), however, does not provide for an established zonal value for industrial lands in Barangay Talon Tres and in any of the Barangays of Las Pias City. You are of the opinion that in the event of sale, it is but proper to use as basis in computing the capital gains tax and documentary stamp tax the value of your properties as appearing on the Tax Declaration, inasmuch as categories for "Industrial" lands are not within the schedules provided for by the BIR. In reply, please be informed that Section 6 (E) of the Tax Code of 1997 provides that the Commissioner is hereby authorized to divide the Philippines into different zones or areas and shall, upon consultation with competent appraisers both from the private and public sectors, determine the fair market value of real properties located in each zone or area. For purposes of computing any internal revenue tax, the value of the property shall be, whichever is the higher of: "(1) the fair market value as determined by the Commissioner; or (2) the fair market value as shown in the schedule of values of the Provincial and City Assessors." It is clear from the above-cited section that for purposes of computing the internal revenue tax (like capital gains tax, creditable withholding tax, documentary stamp tax, etc.), the Commissioner is authorized to determine the fair market value of the properties in specific zones or areas, and such determination, if higher than the fair market value as shown in the schedule of values of the Provincial and City Assessors, shall be the basis of the said tax. In the instant case, the subject properties classified as "Industrial" by the Office of the City Assessor of Las Pias City have no established zonal value as determined by the BIR for such classification in its Barangay or any of the Barangays in said locality. In view of the fact that the aggregate market value of the aforesaid lots as appearing on their Tax Declaration is P35,360,000.00 and is assessed at P2,000.00 per sq.m., then the said value following the foregoing rules shall be the basis in computing the capital gains tax and documentary stamp tax relative to the sale of the above-mentioned properties. ASIDTa It is to be noted that in the event that the gross selling price of the herein properties is higher than the market value as shown in the schedule of values of the City Assessor established herein, such amount shall be used as the basis for computing the internal revenue tax. This will serve as the authority for the Revenue District Officer (RDO) concerned to compute the internal revenue taxes due on the sale based on the value per Tax Declaration/or the gross selling price, whichever is higher and to process the application for issuance of the Certificate Authorizing Registration (CAR). Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service