BIR Ruling No. 091-14

March 7, 2014 BIR RULING NO. 091-14 RA 6657; BIR Ruling No. 012-01 Luisita G. Carvajal F. Gomez St., Brgy. Kanluran Sta. Rosa, Laguna Madam : This refers to your letter dated February 19, 2010 requesting for confirmation that the disturbance compensation in the form of land granted by the heirs of Adela Mariano to Bonifacio D. Beato is exempt from taxes and all other fees. Documents submitted disclose that Deogracias G. Mariano, Herminigildo G. Mariano, Amador G. Mariano, Arcangel M. Santos, Nerma B. Mariano, Cristina B. Mariano, Carmina B. Mariano, Arsenio Bunyi, Bernard M. Bunyi, Ariel M. Bunyi, Marciana R. Mariano, Daniel R. Mariano, Victor R. Mariano, Adelaida R. Mariano and Gertrudes R. Mariano (Heirs of Adela Mariano) are the registered owners of a parcel of land, identified Lot 566 of the Sta. Rosa Estate, CLRO Record No. 8375 covered by Transfer Certificate of Title (TCT) No. (T-38602) 17722 which is issued by the Registry of Deeds for the Calamba, Laguna. The aforesaid property is situated at Sta. Rosa, Laguna with an area of forty two thousand six hundred ninety two square meters (42,692 sq.m.), more or less. On July 3, 2009, a "Sinumpaang Salaysay sa Pagsauli ng Isang Parselang Lupang Bukirin" was executed whereby the owner transferred and conveyed by way of disturbance compensation to Bonifacio D. Beato, two thousand square meters (2,000 sq.m.) portion of the above-mentioned property. A Certification dated December 7, 2009 was issued by Municipal Agrarian Reform Office (MARO) of Sta. Rosa, Bian & San Pedro Chapter, stating that the two thousand square meters (2,000 sq.m.) portion of the property covered by TCT No. (T-38602) 17722 is actually a disturbance compensation under Section 66 of Republic Act (RA) No. 6657. In reply, please be informed that since the conveyance of the owner is in the form of disturbance compensation, the transfer is exempt from capital gains tax and documentary stamp tax pursuant to Section 66 of RA No. 6657 otherwise known as the "Comprehensive Agrarian Reform Law of 1988" which provides, viz. : ESTaHC "Sec. 66. Exemption from Taxes and Fees of Land Transfers. Transactions under this Act involving a transfer of ownership, whether from natural or juridical persons, shall be exempted from taxes arising from capital gains. These transactions shall also be exempted from the payment of registration fees, and all other taxes and fees for the conveyance or transfer thereof. Provided, That all arrearages in real property taxes, without penalty or interest, shall be deductible from the compensation to which the owner may be entitled." Attached to the records is a Certification dated 7th day of December 2009 from the MARO of Sta. Rosa, Bian & San Pedro Chapter, certifying that the two thousand square meters (2,000 sq.m.) portion of the property covered by TCT No. (T-38602) 17722 was verified as disturbance compensation of tenant Bonifacio D. Beato pursuant to RA 3844 (Agricultural Land Reform Code) and RA 6657 (CARP Law). Be it noted that Section 36 (1) of RA 3844, as amended, allows disturbance compensation to a tenant in case of termination of tenancy-relationship by reason of the conversion of the agricultural land into non-agricultural uses. Only Section 35 of RA 3844 was expressly repealed by RA 6657 or the CARP Law. Thus, transfer of land to a tenant by way of disturbance compensation, as in this instance, is still considered one of the transactions contemplated under Section 66 of RA 6657. Accordingly, the transfer by the heirs of Adela Mariano to Bonifacio D. Beato of the two thousand square meters (2,000 sq.m.) portion of the property covered by TCT No. (T-38602) 17722 is exempt from capital gains tax and documentary stamp tax pursuant to the aforecited provision. (BIR Ruling No. 012-01 dated March 14, 2001) On the other hand, the exemption granted under RA No. 6657 is without prejudice to the right of the Government to collect the proper amount of estate tax to the legal heirs pursuant to Section 84 of the Tax Code, as amended. 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.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue