BIR Ruling [DA-627-99]

November 8, 1999 BIR RULING [DA-627-99] Mr . Jovencio A . Hizon Regional Trial Court, Branch 62 Pulung Maragul Angeles City S i r : This refers to your letter dated February 5, 1998 stating that your property was taken by the government through the Department of Public Works and Highways, for the construction of the road dike along the Abacan River Control in Mexico Pampanga; that the said agency had required you to pay the corresponding capital gains and transfer tax; that it is your contention that under Section 85 of Presidential Decree No. 1529 you are not liable to pay the capital gains and transfer tax. cdll In view of the foregoing you are now inquiring on the proper procedure in claiming your tax refund. In reply, please be informed that your claim for tax refund is without legal basis. Section 24(D)(1) of the Tax Code of 1997 provides, viz: "(I) In General . The provisions of Section 39(B) notwithstanding, a final tax of six percent (6%) based on the gross selling price or current fair market value as determined in accordance with Section 6(E) of this Code, whichever is higher, is hereby imposed upon 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 estates and trusts: Provided, That the tax liability, if any, on gains from sales or other dispositions of real property to the government or any of its political subdivisions or agencies or to government-owned or -controlled corporations shall be determined either under Section 24(A) or under this Subsection, at the option of the taxpayer ." Accordingly, expropriation sales are subject to the rates prescribed under Section 24(A) of the Tax Code of 1997 or the 6% capital gains tax as provided by Section 24(D)(1) of the same Code, at the option of the taxpayer regardless of whether any gain or profit was derived therefrom since the aforecited laws is comprehensive enough to cover not only voluntary sale but also involuntary sale as in the instant case. However, both capital gains tax and documentary stamp tax shall be computed based on the actual consideration appearing in the Deed of Sale, pursuant to Revenue Memorandum No. 41-91. In the light of the foregoing, we regret to inform you that we cannot grant your request for refund. (BIR Ruling No. 144-96 dated December 24, 1996) Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group