BIR Ruling [DA-434-04]

August 12, 2004 BIR RULING [DA-434-04] Secs. 34 (h) & 245, 1977 Tax Code Bolipata Bolipata Associates P.O. Box CM 7 Murphy, Quezon City Attention: Atty. R. K. Bolipata Gentlemen : This refers to your letter dated June 22, 2004 requesting for the issuance of tax clearance/certificate and a ruling allowing your client to transfer in his name the title to a lot he bought in Quezon City. It is represented that your client, Julian Colorina, bought a lot from Corazon Lancero, a U.S. citizen residing in Long Beach, California, U.S.A. on February 23, 1985; that the real property is situated at 86 Magal Salamat, Project 4, Quezon City and covered by Transfer Certificate of Title (TCT) No. 86973 of the Registry of Deeds of Quezon City; that the capital gains tax (CGT) was paid by Corazon Lancero in the Office of the Revenue Attache in Los Angeles, California on March 24, 1985, under BIR Official Receipt No. 7206142; that when your client came back to the Philippines in 1988, after a brief stint abroad as an OFW, he tried to secure a new title of the property in his name; that he learned that the Quezon City Registry of Deeds had been burned and that he needed to reconstitute the original title covering the above-mentioned property; that in 2003 or after fourteen (14) years, the Land Registration Authority notified him that his certificate of title had been reconstituted; that the Revenue District Office refused to issue a clearance certificate because of all the bureaucratic requirements which would impose an additional amount estimated at P129,659.75 in order to secure the aforesaid clearance; and that it is your opinion that when the capital gains tax was paid in 1985 to the Bureau's attache in California, all that your client need to do was to present the deed of sale and the official receipt of payment in the US to get the clearance certificate. In reply, please be informed that the documents you presented before the BIR, i.e. , Individual Capital Gains Tax Return (Form No. 1701-E) duly signed and stamped by the Revenue Attache of Los Angeles, California, U.S.A. on May 24, 1985 and the payment receipt under Official Receipt No. 7206142 G duly signed by the Collecting Officer in Los Angeles, C.A. on the same date, are enough proof of due payment of the capital gains tax imposed under then Section 34(h) of the 1977 Tax Code, as amended, the law applicable on the above sale of realty by Corazon Lancero to Julian Colorina on February 23, 1985. However, this Office observed that the documentary stamp tax (DST) imposed under then Section 245 of the 1977 Tax Code, as amended, has not been paid by the parties to the transaction. Thus, it is recommended that your client must first pay the said tax in order for him to get the certificate authorizing the registration of the above-mentioned property in his name. Moreover, since the DST was not paid on time, this Office hereby imposes the penalty and surcharge for late payment of the DST. The rate of the penalty surcharge and interest shall be based on the rate prevailing at the time the transaction took place or at the rate prevailing in the year 1985. Further, the Certificate Authorizing Registration (CAR) shall be issued only upon presentation of the originals of the above-mentioned documents and receipt of payment of the DST and the corresponding penalty, surcharge and interest. IEAacS On the other hand, this Office noted that your client was made to pay the amount of P3,905.00 for capital gains tax plus the increments due thereon as computed by the Revenue District ONETT Officer. It is observed, however, that said assessment by the ONETT Officer is without basis in law thereby making such, payment an erroneous payment of tax, thus, entitling your client to a refund of the said amount. The claim for refund shall be filed with the Revenue Regional Office having jurisdiction over the Revenue District where you paid the tax. Please be guided accordingly. Very truly yours, Commissioner of Internal Revenue By : (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group