Mr. Lazaro E. Esteta

October 17, 2008 BIR RULING [DA-(I-027) 312-08] BIR Ruling No. UN-091-94 & DA-197-05 Mr. Lazaro E. Esteta Barangay Cambaul Alicia, Bohol S i r : This refers to your request, indorsed to this Office by Revenue Region No. 13, Cebu City, for exemption from the payment of capital gains tax on the sale by Rural Bank of San Miguel (Bohol), Inc. of a parcel of agricultural land to you as farmer-beneficiary thereof. As represented, Rural Bank of San Miguel (Bohol), Inc. is a bank organized under the laws of the Philippines and under liquidation by the Philippine Deposit Insurance Corporation, a government-owned and controlled corporation created and existing by virtue of Republic Act (R.A.) No. 3591, as amended, with principal office at 2228 Chino Roces Avenue, Makati City, duly designated as such Liquidator pursuant to Monetary Board Resolution No. 1873 dated December 28, 1999. It is the lawful owner of a parcel of agricultural land situated in Barangay Cambaul, Alicia, Bohol under the Tax Declaration No. 02004-00268 (02-04-126) of the Assessor's Office of Alicia, Bohol consisting of .08779 hectares. On the other hand, Lazaro E. Esteta is a resident of Barangay Cambaul, Alicia, Bohol. On August 22, 2006, an Agreement on Voluntary Land Transfer was executed by and between the above parties transferring the above-described property to Lazaro E. Esteta pursuant to R.A. No. 6657, otherwise known as the Comprehensive Agrarian Reform Law. In reply, please be informed that Section 66 of Republic Act No. 6657 provides as follows: cSATDC "Republic Act No. 6657 "SEC. 66. Exemption 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 or 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." The transactions involving transfer of ownership under R.A. No. 6657 are exempt from the capital gains tax and also from "other taxes". The phrase "other taxes" includes documentary stamp tax imposed under Section 196 of the Tax Code of 1997, as amended, because documentary stamp tax is substantially a tax on the transaction rather than on the document (Op. No. 117, S. of 1939, Sec. of Justice). Accordingly, the transfer by Rural Bank of San Miguel (Bohol), Inc. of the aforementioned parcel of agricultural land is exempt from the payment of capital gains and documentary stamp taxes imposed under Sections 24 (D) and 196, both of the Tax Code of 1997, as amended. 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. DSATCI Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service