Tax Base of Sales or Transfer of Real Property

February 24, 1989 BIR RULING NO. 032-89 77 000-00 032-89 M a d a m : This refers to your letter dated February 3, 1989 requesting a ruling on the tax base of sales or transfer of real property in places where the zonal values of real property for purposes of computing internal revenue taxes have not yet been established. cdtech It is represented that you are the administrator of the estate of the late Amalia Saavedra, a resident of Zamboanga City, who died on June 30, 1987; that prior to your filing of the estate tax return, you consulted BIR officials in Quezon City who informed you that the present method of computing the tax base on sale or transfer of real property in places where the zonal values of real property have not yet been established is governed by RAMO No. 3-87 as amended by RAMO No. 1-88, wherein the fair market value of real property per its latest tax declaration are increased by 10% or 50% depending on the classification of the land; and that when you filed the estate tax return with Revenue District Officer of Zamboanga City, he assessed the property based on a higher valuation computed on a per square meter basis asserting that he has the discretion to assess the property, otherwise, whenever he feels that the 10% or 50% increase is not valid invoking a portion of the provision of RAMO No. 3-87. In reply, please be informed that under Revenue Audit Memorandum Order No. 3-87 pending final determination of zonal values and as a short-run measure to establish a more realistic basis for real property valuation, estate tax among others, shall be assessed either on the basis of the selling price of the real property as shown in the deed of sale or the fair market value thereof. The transitory valuation rule shall be as follows: "(a) In general, the fair market value of the real property (land and/or improvement) per its latest tax declaration filed in the Provincial/City Assessor's Office, shall be increased by ten percent (10%) thereof, to cover inflationary value; "(b) If the real property is located in a developed village/ subdivision within the jurisdiction of the Revenue Regional Office No. 4-B as appearing in the approved attached lists, hereof, the same shall be increased by 50%. The listings of the developed subdivisions of Regional Offices other than Revenue Region No. 4-B, Quezon City, shall likewise be part of this Revenue Audit Memorandum Order upon their submission and subsequent approval by the Commissioner. "(c) If the real property is classified in the tax declaration as a commercial or industrial property, the same shall be increased by fifty percent (50%), regardless of regional location; "(d) If the real property is classified as a fishpond, the same shall be increased by fifty percent (50%), also regardless of regional location. "When the Revenue District Officer concerned feels that the 10% or 50% increase is not valid or when the taxpayer does not agree to the 50% increase over the market value appearing in the latest tax declaration, the Certificate Authorizing Registration to be issued by the Revenue District Officer to the taxpayer shall be plainly marked "TENTATIVE FAIR MARKET VALUE FOR INTERNAL REVENUE TAX PURPOSES PENDING ESTABLISHMENT OF THE APPLICABLE ZONAL VALUE". Upon establishment of the zonal value applicable to the property in question, the assessment shall be revised accordingly". Under the foregoing provisions of RAMO No. 3-87, the Revenue District Officer of Zamboanga City has no discretion to fix the zonal value for estate tax purposes. Precisely, the purpose of fixing zonal values is to remove discretion on the part of revenue officer in the matter of determining valuation of property for tax purposes. Accordingly, in the instant case, since the said revenue official feels that the 10% or 50% increase is not valid, this Office shall nevertheless apply the 50% increase on the fair market value as appearing in the latest tax declaration issued by the City/ Provincial Assessor to arrive at the fair market value of the properties in question for purposes of the estate tax due thereon. However, the Certificate Authorizing Registration to be issued in your favor, after payment of the aforesaid tax, by the Revenue District Officer of Zamboanga City shall be marked "TENTATIVE FAIR MARKET VALUE FOR INTERNAL REVENUE TAX PURPOSES PENDING ESTABLISHMENT OF THE APPLICABLE ZONAL VALUE." Moreover, the Revenue District Officer of Zamboanga City shall revise the assessment accordingly upon the establishment of the applicable zonal value to the aforesaid property. cdta Very truly yours, (SGD.) JOSE U. ONG Commissioner