Gains Derived from Sale of DA Properties which are No longer Needed for Their Operation are Subject to Income Tax

June 17, 1991 BIR RULING NO. 105-91 24 (c) 000-00 105-91 Gentlemen : This refers to your letter dated November 17, 1989 stating that E.O. No. 116 which was promulgated on January 30, 1987, reorganized then the Ministry of Agriculture and Food, now Department of Agriculture (DA), including its units and integrated all offices and agencies like the tobacco agencies whose functions relate to agriculture; that Section 20 (a) thereof, merged/consolidated the various tobacco agencies into what is now known as the National Tobacco Administration; that as sole tobacco agency, you became an attached unit of the DA under Section 19 (b) (3); and that subsequently, E.O. No. 245 was issued on July 24, 1987 implementing the consolidation and prescribing your charter. cdt Based on the foregoing representations, you now request a ruling on the following: a) Whether or not you are subject to income tax or capital gains tax on the sale of your properties no longer needed for your operation; and b) Whether or not the sale is subject to documentary stamp tax. In reply, please be informed that under Section 24 (c) of the Tax Code, as amended, the provisions of existing special or general laws to the contrary notwithstanding, all corporate taxpayers not specifically exempt under Section 26 of the Code shall pay the rates provided in Section 24 of the same Code. All corporations, agencies, or instrumentalities owned or controlled by the government, including the Government Service Insurance System and the Social Security System, shall pay such rate of tax upon their taxable income as are imposed by Section 24 of the Tax Code upon associations or corporations engaged in a similar business, industry, or activity. Such being the case, you are subject to income tax on the gains to be derived from the sale of your properties which are no longer needed for your operation. By reason thereof, under Revenue Regulations No. 6-85, as amended by Revenue Regulations No. 1-90, you are liable to the 5% creditable withholding tax prescribed under Revenue Regulations No. 1-90 implementing Section 50(b) of the Tax Code, as amended, on your sale of your real property beginning January 1, 1990, based on the gross selling price or total amount of consideration or its equivalent paid to you, as seller thereof. For this purpose, the term "Gross Selling Price" means the consideration stated in the sales document or the fair market value/zonal value, whichever is higher. (RMC No. 7-90). Moreover, either party to a taxable document may pay the documentary stamp tax imposed under Section 196 of the Tax Code, as amended. However, whenever one party to the taxable document enjoys exemption from the payment of documentary stamp tax imposed under the said Section, the other party thereto who is not exempt shall be the one directly liable for the tax. (Section 173, Tax Code, as amended). cdtech Very truly yours, (SGD.) JOSE U. ONG Commissioner