BIR Ruling No. 071-82

March 5, 1982 BIR RULING NO. 071-82 34-h 54-82 071-82 Rural Bankers Association of the Philippines RBAP Building Aduana Corner Arzobispo Streets Intramuros, Manila Attention: Atty . Lorenzo M . Miravite Legal Counsel Gentlemen : This refers to your letter dated February 10, 1981, requesting an opinion on the applicability of the final tax on capital gains with respect to real estate collaterals foreclosed by rural banks upon failure of the borrower to pay their loan. In reply, I have the honor to inform you as follows: 1. The capital gains tax prescribed by Section 34(h) of the Tax Code, as amended, applies regardless as to whether the sale is voluntary or involuntary as in the sale of the foreclosed real properties to satisfy the unpaid loan. 2. The rural bank cannot register the foreclosure sales document without presenting to the Register of Deeds concerned the required certification from this Office to the effect that the capital gains tax has been paid. In this connection, either the seller (the owner of the property foreclosed) or the buyer (the rural bank) or both may apply for the issuance of said certification. (Sec. 7, Revenue Regulations No. 8-79) 3. If the capital gains tax is passed on to the buyer (rural bank) which may not be able to register the foreclosure sales document without paying the capital gains tax, the bank cannot invoke the tax exemption privilege granted it under Republic Act No. 720, as amended. This is so since the capital gains tax is the direct liability of the seller. The fact that the tax is shifted to the buyer (rural bank) will not convert the same as tax on the buyer for purposes of the exemption. cdtech Very truly yours, RUBEN B. ANCHETA Acting Commissioner