Sale of Property at Execution Sale and Its Registration Not Subject to Capital Gains and Documentary Stamp Taxes

September 25, 2001 BIR RULING NO. 044-01 Secs. 24 (D) (1) & 196 000-00 Raul S. Sison & Associates 12 Happy Glen Loop, Sun Valley drive South Expressway, Paraaque City Attention: Atty. Raul S. Sison Gentlemen : This refers to your letter dated April 13, 2000, which was referred to this Office by Revenue Region No. 8, Makati City, requesting in behalf of your client, Galo T. Villanueva, for a ruling as to whether or not the payment of capital gains tax and documentary stamp tax is required in the registration of a Sheriff's Certificate of Sale, relative to the execution sale conducted on March 31, 2000, considering that the property is still subject to redemption within a period of one (1) year reckoned from the date of registration with the Office of the Registry of Deeds. It appears that on March 31, 2000, a public auction sale was conducted by Rumel M. Macalisang, Branch Sheriff of Regional trial Court, Branch 258, Paraaque City, pursuant to a Writ of Execution issued by Erlinda R. Ramirez-Acda, OIC, Office of the Branch Clerk of Court dated February 10, 2000 in the case entitled "Galo T. Villanueva versus The Heirs of the Late Maria Lorica and Melquiades Molera, namely: Gerardo L. Molera, Edgardo L. Molera, Sergio L. Molera, Sergio L. Molera and Deogracias L. Molera" docketed as Civil Case No. 94-0001(93-4072); that Sheriff Rumel M. Macalisang sold at public auction to the highest bidder, Galo T. Villanueva, a parcel of land together with the improvements thereon located at Paraaque City covered by TCT No. (318029) S-36657 39413/41683 issued by the Registry of Deeds for Paraaque for the total amount of P500,000.00; and that when you presented for recording with the Registry of Deeds for Paraaque City, the aforementioned certificate of sale, the Register of Deeds did not accept the said certificate on the ground that the capital gains tax and the corresponding documentary stamp tax should first be paid. In reply thereto, please be informed that Section 25 of Rule 39 of the Rules of Court provides that upon a sale of real property, the officer must give to the purchaser a certificate of sale containing: (a) A particular description of the real property sold; (b) The price paid for each distinct lot or parcel; (c) The whole price paid by him; (d) A statement that the right of redemption expires one (1) year from the date of the registration of the certificate of sale. Such certificate must be registered in the registry of deeds of the place where the property is situated. A careful scrutiny of the above-cited law discloses that the one (1) year period of redemption is reckoned from the time of registration of the sale in the Office of the Register of Deeds. Section 28 of Rule 39 of the Rules of Court allows the judgment obligor, or redemptioner, to redeem the property from the purchaser within one (1) year from the date of registration of the certificate of sale. If, however, the property is not redeemed within the one (1) year redemption period, the purchaser or redemptioner shall be substituted to and acquire all the rights, title, interest and claim of the judgment obligor to the property at the time of the levy of attachment or execution. (Sec 33, Rule 39, Rules of Court) Thus, we must not disregard the fact that a certificate of sale given to the purchaser at the time the sale is made is different and distinct from the final deed, which is delivered at the expiration of the period of redemption, since the former is not intended to operate as an absolute transfer of the property, but merely to identify the property, price paid, and the date when the right of redemption expires. In other words, it is but a mere memorial of the fact that a purchase was made by the person named in the certificate as the buyer. (Yap vs. Intermediate Appellate Court, G.R. No. 68464 dated March 22, 1993) Considering that the transfer of ownership is not perfected until the execution and delivery of the sheriff's final deed of sale after the expiry of the one (1) year redemption period, and considering further that registration of the certificate of sale is a mere ministerial act by which an instrument is sought to be inscribed in the records of the Office of the Registry of Deeds and annotated at the back of the certificate of title covering the land subject of the instrument, it is therefore safe to conclude that mere sale of the property at an execution sale under Rule 39 of the Rules of Court and the corresponding registration of the certificate of sale in the Office of the Registry of Deeds is not subject to the capital gains tax and documentary stamp tax as respectively prescribed in Sections 24(D)(1) and 196 both of the Tax Code of 1997. SUCH BEING THE CASE, this will therefore serve as an authority for the Registrar of Deeds to register the aforementioned sheriff's certificate of sale and to annotate at the back of the certificate of title covering the land subject of the execution sale, without the payment of the capital gains tax and the corresponding documentary stamp tax. 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.) RENE G. BAEZ Commissioner of Internal Revenue