Transfer of Land to CARP Beneficiaries Exempt from Capital Gains Tax and Documentary Stamp Tax

March 14, 2001 BIR RULING NO. 012-01 ForForm CARP Beneficiaries Association (F.C.B.A.) Brgy. Dayap, Calauan, Laguna Attention: Mr . Tomas Cantalejo F.C.B.A. President Gentlemen : This refers to your letter dated May 18, 2000 requesting in effect for exemption from whatever taxes due on the transfer by ForForm Development Corporation (FORFORM) of its 27 hectares of land in favor of the members of ForForm CARP Beneficiaries Association (FCBA). ISADET Per investigation conducted by Revenue District No. 56, Calamba, Laguna, FORFORM is a duly organized corporation with principal office address at 6/F Builders Center, Salcedo St., Legaspi Village, Makati City; that it claims to be the owner of 33 parcels of land covering an area of 155,007 hectares of agricultural land located at Dayap, Calauan, Laguna; that in 1990, these parcels of land became the subject of the Comprehensive Agrarian Reform Program of the government under the Voluntary Land Transfer/Voluntary Offer to Sell Scheme (VLT/VOS); that to comply with the provisions of said law, on May 5, 1996, FORFORM entered into an agreement with the association of the different farm workers of their land consisting of the regular, seasonal and other farm workers otherwise referred to as the FCBA, an organization duly registered with the Department of Labor at San Pablo City; that in their agreement titled "KASUNDUAN", FORFORM agreed to convey 27 hectares of land to FCBA as disturbance compensation for all its members who are Qualified Agricultural Beneficiaries (QABs); that out of the 27.02 hectares, 15.50 hectares were allotted to regular workers, 5.90 hectares for seasonal workers and 5.62 hectares for other farm workers; that the titles covering the 27 hectares of land however, remain in the names of the original owners/stockholders of FORFORM; that on October 2, 1996 FORFORM filed an application for the conversion of the 33 parcels of land from agricultural to residential/non-agricultural uses before the Department of Agrarian Reform, which included the 27 hectares of land allotted to FCBA; that on May 5, 1997, DAR in its conversion Order No. 97-43-02 approved the aforesaid application for conversion subject, however, to the condition, among others, that the farmers/occupants/claimants of the subject lands shall be paid disturbance compensation as agreed upon by the parties; and that per Certification issued by the Department of Agrarian Reform, Region IV, the subject property was awarded/given by the landowner, FORFORM to the qualified farmer-beneficiaries of the Comprehensive Agrarian Reform Program (CARP) of the government, who are likewise FCBA members, as payment of their "disturbance compensation"; that the said property was awarded to the farmer-beneficiaries as espoused by the program; and that the same falls squarely under the provision of Section 66 of R. A. No. 6657. In reply, please be informed that since the 27.07 hectares of land conveyed by FORFORM in favor of the members of the FCBA is in the form of disturbance compensation pursuant to conversion Order no. 97-43-02 of the Department of Agrarian Reform, no capital gain was derived by the landowner as a result of said transaction. Such being the case, the transfer is exempt from capital gains tax and documentary stamp tax pursuant to Section 66 of Republic Act No. 6657 which provides, viz: "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 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." Such being the case, the transfer by FORFORM of the aforementioned 27 hectares of land in favor of the qualified beneficiaries, such as the regular workers (15.50 hectares), seasonal workers (5.90 hectares), and other farm workers (5.62 hectares) of the FCBA in the form of disturbance compensation is exempt from capital gains tax and documentary stamp tax pursuant to the aforecited provision. 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.) RENE G. BAEZ Commissioner of Internal Revenue