Eventual Sale by Pantranco Employees Association - PTGWO "PEA-PTGWO" of Property Not Subject to Creditable Withholding Tax and Documentary Stamp Tax Considering that Income and the Properties of Legitimate Labor Organizations are Exempt from Taxes pursuant to the Labor Code of the Philippines

July 29, 1997 BIR RULING NO. 083-97 50 (b) 196 000-00 083-97 Fernandez Pealosa & Associates 7th Floor, Far East Bank Center Sen. Gil J. Puyat Ave., Makati City Attention: Atty . Rodolfo B . Fernandez Gentlemen : This refers to your letter dated May 9, 1997 stating that the Pantranco Employees Association PTGWO "PEA-PTGWO" is a legitimate labor union with Registration Certificate No. 3490-IP issued on February 23, 1962; that on March 8, 1995, Sheriff Juanito J. Atienza executed a Certificate of Sale covering Lot No. 932-F-1 of the subdivision plan LRC Cad. Record No. 1496, situated in Poblacion, Santiago City, Isabela covered by Transfer Certificate of Title No. T-54957, levied by him on even fate for partial execution of the award for backwages, separation pay, retirement pay and other benefits which the National Labor Relations Commission has granted in favor of PEA-PTGWO in NLRC-NCR Case No. 6-2863-83; that the case has become final and executory pursuant to the Entry of Judgment issued by the Supreme Court in G.R. No. 110317 promulgated on December 27, 1993; that since the twelve (12) month period of redemption has lapsed without any redemptioner having tendered a notice to redeem, Sheriff Juanito Atienza executed the Final Deed of Sale on the aforementioned property in favor of PEA-PTGWO; that on April 29, 1996, the Labor Arbiter has issued an order directing the Register of Deeds of Isabela to register the Sheriff Final Deed of Sale executed by Sheriff Juanito Atienza on March 25, 1996 covering Lot No. 9232-F-1 situated in Poblacion, Santiago City, Isabela covered by TCT No. 54957, to cancel TCT No. 54957 and to issue another Transfer Certificate of Title covering said land in favor of PEA-PTGWO; that PEA-PTGWO is now working on the transfer of the title in its name; that meanwhile, it has offered the property for sale to interested parties. In connection therewith, you are requesting a ruling to the effect that the eventual sale by the PEA-PTGWO of the aforementioned property presently covered by TCT No. 54957 is not subject to the creditable withholding tax and to the documentary stamp tax considering that the income and the properties of legitimate labor organizations are exempt from taxes pursuant to Article 242, Chapter III, Title IV, Book V of the Labor Code of the Philippines. In reply thereto, please be informed that Article 242, Chapter III, Title IV, Book V of the Labor Code of the Philippines, as amended by Republic Act Nos. 6715, 6725 and 6727 provides as follows: " Chapter III " RIGHTS OF LEGITIMATE LABOR ORGANIZATIONS "ART. 242. Rights of legitimate labor organizations . "(a) . . . "(b) . . . "(c) . . . "(d) To own property, real or personal, for the use and benefit of the labor organization and its members ; "(e) . . . "(f) . . . " Notwithstanding any provision of a general or special law to the contrary, the income and the properties of legitimate labor organizations, including grants, endowments, gifts, donations and contributions they may receive from fraternal and similar organizations, local or foreign, which are actually, directly and exclusively used for their lawful purposes, shall be free from taxes, duties and other assessments . The exemptions provided herein may be withdrawn only by a special law expressly repealing this provision ." (Emphasis supplied). Under the aforequoted provision, the income and properties of legitimate labor organizations which are actually, directly and exclusively used for their lawful purposes shall be exempt from taxes, duties and other assessments. Such being the case, and since the PEA-PTGWO is a legitimate labor organization as shown by the certification dated September 3, 1996 of the Bureau of Labor Relations of the Department of Labor and Employment, the income which it may derive from the sale of its aforementioned property covered by TCT No. 54957 which was acquired by it as a result of the partial execution of the award for backwages, separation pay, retirement benefits and other benefits granted by the National Labor Relations Commission in its favor shall be exempt from the creditable withholding tax provided under Revenue Regulations No. 6-85 as amended by Revenue Regulations No. 12-94 implementing Section 59(b) of the Tax Code, as amended. Moreover, under Section 173 of the Tax Code, as amended, whenever one party to the taxable document enjoys exemption from the documentary stamp tax, the other party thereto who is not exempt shall be the one directly liable for the tax. Accordingly since PEA-PTGWO is exempt from the payment of the documentary stamp tax imposed under Section 196 of the Tax Code, as amended, on the Deed of Sale it may execute in the sale of its aforementioned property, the other party thereto, that is, the buyer who is not exempt shall be the one directly liable for the payment of the documentary stamp tax. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon the investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. aisadc Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue