Capital Gains Presumed to have been Realized from the Sale, Exchange or Other Disposition of Real Property Located in the Philippines Classified as Capital Assets, Including Pacto De Retro Sales and Other Forms of Conditional Sales, by Individuals, Including Estates and Trusts, Shall be Taxed at the Rate of 5% Based on the Gross Selling Price or the Fair Market Value Prevailing at the Time of the Sale, Whichever is Higher

February 27, 1996 BIR RULING NO. 029-96 21 (e) 000-00 029-96 Atty. Venice A. Andaya Suite 707 Fedman Suites 199 Salcedo St., Legaspi Village Makati, Metro Manila M a d a m : This refers to your letter dated June 15, 1995 stating that a Deed of Exchange was executed by and between Dominador Ramos and Guillermo Pascual, both residents of Bo. Sto. Nio, Paraaque, Metro Manila, concerning real estate properties located in Bo. Ibayo, Paraaque, Metro Manila; and that the said Deed of Exchange was executed by the parties voluntarily and without any financial consideration on both parties. LLphil Based on the foregoing representation and documents submitted, you now request in effect exemption from the payment of capital gains tax on said exchange transaction. In reply, please be informed that Section 21(e) of the Tax Code, as amended, provides that capital gains presumed to have been realized from the sale, exchange or other disposition of real property located in the Philippines classified as capital assets, including pacto de retro sales and other forms of conditional sales, by individuals, including estates and trusts, shall be taxed at the rate of 5% based on the gross selling price or the fair market value prevailing at the time of the sale, whichever is higher. Such being the case, both exchanging parties are subject separately and distinctly to capital gains tax based on the fair market value or zonal value whichever is higher. Moreover, pursuant to Section 196 of the Tax Code, as amended, a conveyance or deed whereby land is assigned or transferred to another is subject to documentary stamp tax based on the consideration or value received or contracted to be paid for such realty. Furthermore, the notarial acknowledgment to the said deed is subject to the documentary stamp tax of P10.00 only pursuant to Section 188 of the Tax Code, as amended by Republic Act No. 7660. casia Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue