NSDC Not Exempt from Capital Gains Tax in Connection with the Proposed Sale of Subdivided Properties to Its Employees

February 24, 1992 BIR RULING NO. 061-92 21 (e) 000-00 061-92 National Sugar Development Corporation 9th Floor NIDC Building Gil J. Puyat Avenue Makati, Metro Manila Attention: Mr . Juan W . Moran President Gentlemen : This refers to your letter dated July 5, 1990 to the Revenue Regional Director of San Fernando, Pampanga, requesting for a certification that in connection with the proposed sale of your subdivided properties located in two barrios in Pampanga, to your employees, you are exempt from the payment of capital gains tax. It is represented that you are a former subsidiary of the Philippine National Bank but is presently under the National Government through the Asset Privatization Trust by virtue of Proclamation No. 50; that in 1986, you offered to sell to your employees the house and lot that they occupy as part of their retirement benefits; that the subdivision plan of your real properties located in two barrios and covering 10.3 hectares has been approved by the Bureau of Land. In reply, we quote Section 35 of Proclamation No. 50 for reference: "Sec. 35. Exemption from Taxes, fees, and Other Charges . The provision of any law to the contrary notwithstanding, the Trust as well as the corporations and assets held by it, shall be exempt from all taxes, fees, charges, imposts, and assessments arising from or occasioned by the passing of title over such corporations or assets from the government institutions to the Trust and/or from the Trust to a private acquisitor or buyer imposed by the National Government or any subdivision thereof including but not limited to stock transfer taxes, capital gains taxes, documentary stamps, registration fees, and the like: Provided, that in the case of the said government institutions acquired the said assets by foreclosure, the non-payment of similar taxes, fees, charges, imposts and assessments shall not be a bar to the consolidation of the title in the foreclosing institutions and the subsequent passing of the title to the Trust or the corporations held by the Trust. (Emphasis supplied)" Gleaned from the underscored portion above, the tax exemption applies only to the transfer of (a) assets from the Government institutions to the Trust and/or (b) assets from the Trust to the private acquisitors or buyers. This is a sale of houses and lots (belonging to NASUDECO) to employees who have rendered long years of service in connection with the trade or business of NASUDECO, so that such sales obviously do not fall under either of the two (2) instances (a) and (b) of tax-exempt transfers. Accordingly, your request is hereby denied for lack of legal basis. Very truly yours, JOSE U. ONG Commissioner of Internal Revenue