Correct Basis for Computing the Capital Gains Tax and Documentary Stamp Tax Relative to the Sale of a Townhouse

February 6, 1998 BIR RULING NO. 028-98 000-00-028-98 Ms. Fe R. Raya 145 Kanlaon St. Quezon City M a d a m : This refers to your letter dated September 17, 1997 requesting, in effect, for a ruling on the correct basis for computing the capital gains tax and documentary stamp tax relative to the sale of a townhouse unit covered by a Transfer Certificate of Title. llcd It is represented that you are the registered owner of a parcel of land with improvements thereon consisting of a townhouse unit covered by TCT No. RT-82362(312387), now TCT No. 177983, issued by the Register of Deeds of Quezon City, located at Unit Park Place Townhomes, Nicanor Reyes St., Xavierville II, Quezon City and with a lot area of 54 square meters and 30 square decimeters and a floor area of 88 square meters; that on August 20, 1997, you executed a Deed of Absolute Sale in favor of Ms. Lourdes R. Raya, whereby you transferred to the latter the above-mentioned properties for the amount of P1,086,000.00 for which the capital gains tax of P56,492.50 and the corresponding documentary stamp tax of P16,950.00 have been paid based on the zonal valuation of P12,000.00 per square meter and market value of P478,250.00; that you are encountering a problem in the release of the Certificate Authorizing Registration (CAR) of the sale of your townhouse unit since the Revenue District Officer of Quezon City is recomputing the capital gains tax and documentary stamp tax to be based on the zonal value of P25,000.00 per square meter; and that you vehemently protested the basis used by the RDO of Quezon City, contending that lands in Quezon City have zonal values and that the subject townhouse unit is covered by a Transfer Certificate of Title and not a Condominium Certificate of Title. In reply, please be informed that under Department Order No. 66-96 dated April 30, 1996, relative to the "Implementation of the Revised Zonal Values of Real Properties in Quezon City under Revenue District No. 38 (North Quezon City) Revenue Region No. 7, (Quezon City) for Internal Revenue Tax Purposes, paragraph 5 of the guidelines provides as follows: "xxx xxx xxx "5. Values of Condominium and Townhouses In determining or arriving at the zonal values for condominiums and townhouses, the value of the land as well as the value of the building shall be treated as one, if the title is a CCT or Condominium Certificate of Title. However, if the title is a TCT or Transfer Certificate of Title, land and improvements shall be given separate values. The ground floor of a condominium shall be classified as commercial and 20% of the established value shall be added thereto. xxx xxx xxx Such being the case, if as you have represented, your subject real property is a townhouse unit covered by a Transfer Certificate of Title (TCT), then the land and the improvements thereon should be given separate values for purposes of computing the capital gains tax and documentary stamp tax in accordance with the aforequoted provision of Department Order No. 66-96 dated April 30, 1996. 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. LLphil Very truly yours, (SGD.) LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue