Felicisima Colos Reterta

September 4, 2009 BIR RULING [DA-(I-032) 491-09] DA058-06 Felicisima Colos Reterta General Trias, Cavite Madam : This refers to your letter dated October 23, 2008, which was referred to this Office by Revenue Region No. 9, San Pablo City, by way of its 2nd Indorsement dated March 10, 2009, requesting that the award of the disturbance compensation in the form of lots to Patricio C. Colos is exempt from taxes and all other fees as contemplated under Section 66 of Republic Act (R.A.) No. 6657, otherwise known as the Comprehensive Agrarian Reform Law of 1998. HaIATC It appears that in a Decision dated December 19, 2001 of the Adjudication Board of the Department of Agrarian Reform, Province of Cavite, Trece Martires City, docketed as DARAB Case No. R-402-001-98 entitled Patricio C. Colos, Complainant, vs. Augusto C. Ignacio, Sps. Benjamin and Leonarda R. Ascano, Sps. Isagani and Elizabeth P. Closas, Sps. Nemesio V. Colmenar and Patricia Colorina and Arnel and Arleen, both surnamed Poblete, Defendants, ruled that "WHEREFORE, in view of the * all the foregoing considerations, JUDGMENT is hereby rendered: 1. Ordering defendant Augusto Ignacio to pay Complainant Patricio Colos disturbance compensation corresponding to Lots 1778-C, D and A-1 in accordance with the provisions of Sec. 36(1) of R.A. 3844, as amended; 2. Directing Complainant Patricio Colos to cause the segregation of his 2,380 square meter lot from Lot 1178-A-2 and meanwhile to have the deed of conveyance or sale dated August 19, 1977 executed by Arnel and Arleen by virtue of the Decision rendered in CAR Case No. 962'77, Patricio Colos vs. Augusto Ignacio, et al. annotated on the certificate of title covering Lot No. 1778-A-2 preparatory to the final transfer of the subject property/parcel of land in the absolute ownership Patricio Colos and Finally 3. Directing the Complainant to have the subject parcel of land declared for taxation purposes with the office of the municipal assessor of Gen. Trias, Cavite. SO ORDERED." In reply thereto, please be informed that Section 66 of R.A. No. 6657 provides that "SECTION 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 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." In stressing the rationale of the above-mentioned provisions, this Office elucidated the matter in BIR Ruling No. DA058-06 dated February 23, 2006 as follows: "Since the conveyance of the 26 parcels of land by MRI in favor of the farmer beneficiaries is in the form of disturbance compensation to the farmer beneficiaries who were displaced from their respective areas of tillage, no capital gains tax/creditable withholding tax is due on the transaction in accordance with the afore-quoted provisions of R.A. No. 6657. Furthermore, since the transaction is without any monetary consideration and not in connection with a sale, no creditable withholding tax and documentary stamp tax imposed under Sections 27 and 196, respectively, of the Tax Code, as amended, is due on the transaction. However, the notarial acknowledgment on the Deed of Conveyance of Land and Voluntary Surrender of Leaseholding and Tenancy Rights is subject to the DST on certification pursuant to Section 188 of the Tax Code of 1997, as amended. TacADE Accordingly, this Office hereby confirms your opinion that the conveyance of the 26 parcels of land through a Deed of Conveyance of Land and Voluntary Surrender of Leaseholdings and Tenancy Rights by Moldex Realty, Inc. in favor of the farmer beneficiaries is not subject to capital gains/creditable withholding and documentary stamp taxes." In the same vein, the transfer and award of the above-mentioned property as disturbance compensation to Patricio C. Colos, in the form of lots to the Transferee, a qualified farmer/beneficiary, through a deed of sale/conveyance, is not subject to capital gains/creditable withholding and the corresponding documentary stamp taxes. 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. Very truly yours, (SGD.) GREGORIO V. CABANTAC Deputy Commissioner Legal & Inspection Group