Denial of Request for Waiver of Surcharge, Interest and Penalty Due to Non-payment of DST and CGT

September 11, 2000 BIR RULING NO. 038-00 Sec. 204 (A) (2) 000-00 Ms. Teresita Santos, et al. c/o Ms. Potenciana Jabson 30 R. Jabson St., Brgy. Malinao Pasig City Gentlemen : This refers to your letter dated July 15, 1997 requesting for the waiver of the surcharge, interest and compromise penalty due to non-payment of Documentary Stamp Tax (DST) and Capital Gains Tax (CGT) assessed and issued by BIR-Quezon City Office, by reason of financial incapacity. It is represented that you and other buyers, namely: Name of Buyer Assessment No. DST (Basic) CGT (Basic) Teresita Santos 11-176-96 P1,240.62 P5,334.34 Azucena Sunga 11-178-96 1,225.00 5,238.03 Alicia Basilio 11-143-96 1,121.87 4,753.99 Francisco Dizon 11-177-96 1,300.00 5,623.30 Josenido Ondivilla 11-469-96 681.25 3,504.29 Virginia Tiemsen 11-170-96 2,350.00 9,476.05 Milagros de Villa 11-145-96 1,256.25 5,427.79 Brenda Petras 11-172-96 1,256.25 5,430.66 Rogelia Felipe 11-173-96 1,240.62 5,334.34 Reynaldo Bernate 11-107-96 1,150.00 4,849.00 Erlinda Robles 11-175-96 1,262.50 5,430.66 Jesus Briones 11-168-96 1,300.00 5,623.30 Ignacio Jabinas 11-171-96 1,450.00 6,393.85 were proven to be urban peasants and originally possessors in bad faith of various parcels of land owned by Potenciana Jabson as per actual investigation and ocular inspection made by our Regional Office, Quezon City; that in exchange for the easy terms afforded to you by the landowner, you agreed to shoulder all transfer taxes required by law; and that in keeping with the said agreement between you and the landowner, you are requesting this Office to allow you to settle your liabilities by way of paying only the basic tax due (DST and CGT), taking into consideration your financial status. In reply, please be informed that Section 2 of Revenue Regulations No. 13-85 implementing then Section 21(b) (now Section 24(D)(1) of the Tax Code of 1997) provides that the person liable to pay the capital gains tax is the seller or the person who is presumed to have realized an income or gain from the transaction. This Office recognizes the validity of the agreement between the seller and the buyers whereby the latter assumed the payment of all transfer taxes as having the force of law between the parties. However, Section 204(A)(2) of the Tax Code of 1997 is for the benefit of the person liable under the law to pay the tax. Under the law it is the seller who is liable to pay the capital gains tax. It appears that the financial position of the seller does not demonstrate a clear inability to pay the assessed tax. Accordingly, there is no basis for compromise insofar as the seller is concerned. To rule otherwise would provide an opportunity for circumventing the law. In view of the foregoing, we regret to inform you that your request is hereby denied for lack of legal basis. DaESIC 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.) DAKILA B. FONACIER Commissioner of Internal Revenue