BIR Ruling No. 043-10

August 27, 2010 BIR RULING NO. 043-10 R.A. 6657; BIR Ruling Nos. UN-091-94 & DA-197-05 Mr. Pedro Makiling and Mr. Victorio Makiling c/o Mr. Ricardo G. Boncales Municipal Agrarian Reform Officer Dagohoy, Bohol Gentlemen : This refers to your request, indorsed to this Office by Revenue Region No. 13, Cebu City, for exemption from the payment of capital gains tax on the sale by the Heirs of Gregorio Barbon of agricultural lots in favor of farmer-beneficiaries thereof. Documents submitted show that the Heirs of Gregorio Barbon are the lawful owners of a parcel of agricultural land situated in Barangay Candelaria, San Miguel, Bohol covered by Transfer Certificate of Title No. 10404 containing 51,804 square meters. On October 30, 2006, a Deed of Extrajudicial Adjudication of Estate with Simultaneous Absolute Sale under R.A. 6657 was executed by the Heirs of Gregorio Barbon transferring in favor of Pedro Makiling and Victorio Makiling Lot 741-A and Lot 41-C, with an area of 30,000 sq.m. and 21,804 sq.m., respectively, of the abovedescribed property. On February 2, 2007, Ricardo G. Boncales, the Municipal Agrarian Reform Officer of Dagohoy, Bohol certified that the subject properties are covered under the Comprehensive Agrarian Reform Program through Voluntary Land Transfer/Direct Payment Scheme. CAcIES In reply, please be informed that pursuant to Section 66 of Republic Act No. 6657 and Section 9 of Executive Order No. 229 quoted as follows: "Republic Act No. 6657 "SECTION 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 or 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." the transactions involving transfer of ownership under R.A. No. 6657 are exempt from the capital gains tax and also from "other taxes." The phrase "other taxes" includes documentary stamp tax imposed under Section 196 of the Tax Code, as amended, because documentary stamp tax is substantially a tax on the transaction rather than on the document (Op. No. 117, S. of 1939, Sec. of Justice). Accordingly, the transfer by the Heirs of Gregorio Barbon of the aforementioned two parcels of agricultural land are exempt from the payment of capital gains and documentary stamp taxes imposed under Sections 24 (D) and 196, both of the Tax Code, as amended. 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. IcEaST Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue