BIR Ruling No. 083-15

April 8, 2015 BIR RULING NO. 083-15 Sections 24 (D) (1), 188 & 196 of the Tax Code of 1997, as amended; BIR Ruling No. 360-11 Home Guaranty Corporation 335 Sen. Gil J. Puyat Avenue, Makati City Attention: Bienly John Y. Machon Legal Researcher Gentlemen : This refers to your undated letter duly indorsed Revenue Region No. 5-Caloocan City, requesting opinion on the Deed of Exchange executed by and between the Home Guaranty Corporation (HGC) and Arlene Jacobo. Document submitted disclosed that HGC, formerly Home Insurance and Guaranty Corporation, a government owned and controlled corporation duly organized and existing under and by virtue of Republic Act No. 8763 and successor-in-interest of Bliss Development Corporation (BDC); that BDC executed a Deed of Absolute Sale in favor of Spouses Reynaldo Gonzales and Angeline Gonzales (Spouses Gonzales) involving a certain property then covered by Transfer Certificate of Title TCT No. T-120990; that on May 17, 1988, due to construction defects of the property covered by TCT No. T-120990, Spouses Gonzales requested the transfer of occupancy and took physical possession of the property covered by TCT No. T-240530, which was owned and registered under the name of BDC; that the contract with Spouses Gonzales relative to the said property was not amended; that on April 11, 2011, Spouses Gonzales subsequently transferred their ownership of the property covered by TCT No. T-120990 to Arlene Jacobo and now covered by TCT No. 001-2011001307; that Arlene Jacobo continues to occupy the property registered under TCT No. T-240530; that the property described under TCT No. 001-2011001307 (T-120990) was awarded by BDC to Ms. Clara Escanlar; and that in order to amend the respective contracts among HGC, Arlene Jacobo and Ms. Clara Escanlar, HGC and Arlene Jacobo executed a Deed of Exchange dated October 14, 2013, whereby HGC conveyed and transferred to Arlene Jacobo the property covered by TCT No. T-240530 and Arlene Jacobo conveyed and transferred to HGC the property covered by TCT No. 001-2011001307. Hence, this request. In reply, we regret to inform you that your request for tax exemption cannot be granted for lack of legal basis. Section 24 (D) of the Tax Code of 1997, as amended, provides, viz. : Section 24 (D) Capital Gains from Sale of Real Property . (1) In General . The provisions of Section 39 (B) notwithstanding, a final tax of 6% based on the gross selling price or current market value as determined in accordance with Section 6 (E) of this Code, whichever is higher, is hereby imposed upon the capital gains presumed to have been realized from the sale, exchange and other dispositions of real property located in the Philippines, classified as capital assets, including pacto de retro sales and other forms of conditional sales, by individuals, including estates and trusts: ..." The exchange of the said properties are is covered by the clause "other dispositions of real property" under Section 24 (D) of the Tax Code of 1997, as amended, and therefore subject to the capital gains tax imposed therein. The conveyance being a disposition of real property under Section 24 (D) of the Tax Code, as amended, is likewise subject to the documentary stamp taxes (DST) imposed in Section 188 and Section 196 of the Tax Code, as amended. (BIR Ruling No. 360-11 dated September 30, 2011) cHDAIS Such being the case, both exchanging parties, i.e. , HGC and Arlene Jacobo, separately and distinctly, to the 6% capital gains tax based on the fair market value or zonal value of the properties, whichever is higher, and DST as imposed under Section 188, Section 196 and Section 24 (D) (1) of the Tax Code of 1997, as amended. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue