Ms. Eulalia M. Cortez

July 23, 2008 BIR RULING [DA-(I-007) 070-08] UN123-94 Ms. Eulalia M. Cortez Sta. Maria Trinidad Malolos, Bulacan M a d a m : This refers to your letter dated December 17, 2007 which was referred to this Office by Revenue Region No. 5, Valenzuela City, by way of its 1st Indorsement dated January 15, 2008, requesting for a ruling on the tax consequence of the conveyance of an agricultural parcel of land by the registered owners, Spouses Eulalia Maclang and Benjamin Cortez to their tenant beneficiaries by way of disturbance compensation pursuant to Administrative Order No. 15, series of 1988, authorizing the conversion of private agricultural lands to non-agricultural uses, in relation to Republic Act (R.A.) No. 6657, otherwise known as the Comprehensive Agrarian Reform Program (CARP). caIDSH In reply thereto, please be informed that Section 66 of R.A. No. 6657 states that "SEC. 66. Exemptions from taxes and fees of land transfers . Transactions under this Act involving a transfer of ownership, whether from natural or juridical persons, shall be exempted from taxes arising from capital gains. These transactions shall also be exempted from the payment of registration fees, and all other taxes and fees for the conveyance or transfer thereof: Provided, that all arrearages in real property taxes, without penalty or interest, shall be deductible from the compensation to which the owner may be entitled." Thus, the transfer of titles to lots distributed to the beneficiaries as a form of disturbance compensation are exempt from the capital gains tax and also from the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. (BIR Ruling No. 104-90 dated May 29, 1990) This exemption applies not only to transfers of ownership over lands actually tilled by the tenants, but also to the conveyance of house and lot by way of disturbance compensation, by the landowner-transferor to the tenant-beneficiaries. Accordingly, the transfer of the above-mentioned agricultural land to the tenant-beneficiaries by way of disturbance compensation is not subject to the capital gains tax and the corresponding documentary stamp tax imposed under Section 196 of the Tax Code of 1997. 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. ITDHSE Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service