BIR Ruling No. 122-13

March 25, 2013 BIR RULING NO. 122-13 Sec. 16, R.A. 8282; Sec. 173, NIRC; BIR Ruling No. 042-98 Social Security System East Avenue, Diliman, Quezon City Attention: Mr. Emilio S. de Quiros, Jr. President & CEO Gentlemen : This refers to your letter dated 20 July 2012 requesting confirmation of the tax exemption of SOCIAL SECURITY SYSTEM (SSS) under Section 16 of Republic Act (R.A.) No. 8282 or the Social Security Act of 1997, as amended. SEIDAC It is represented that the SSS, through its regional offices/branches, as part of its regular operations, disposes real properties that were acquired through foreclosure of mortgaged properties of delinquent housing loan borrowers; that upon execution of Deed of Absolute Sale in favor of SSS acquired asset buyers, the latter cause the transfer of the title from SSS to themselves; that the BIR Revenue District Offices (RDO) hold in abeyance the Certificate Authorizing Registration pending receipt of confirmation of the tax exemption of the SSS from capital gains tax on the sale by SSS of its acquired assets to be issued by the BIR; and that Section 16 of R.A. No. 8282 provides for the tax exemptions and incentive of SSS. In reply, please be informed that Section 27 (D) (5) of the Tax Code of 1997, as amended provides: "(5) Capital Gains Realized from the Sale, Exchange or Disposition of Lands and/or Buildings . A final tax of six percent (6%) is hereby imposed on the gain presumed to have been realized on the sale, exchange or disposition of lands and/or buildings which are not actually used in the business of a corporation and are treated as capital assets, based on the gross selling price of fair market value as determined in accordance with Section 6 (E) of this Code, whichever is higher, of such lands and/or buildings.'' Section 16 of R.A. No. 8282, on the other hand, states: "SEC. 16. Exemption from Tax, Legal Process and Lien. All laws to the contrary notwithstanding, the SSS and all its assets and properties, all contributions collected and all accruals thereto and income or investment earnings therefrom, as well as all supplies, equipment, papers or documents shall be exempt from any tax, assessment, fee, charge, or customs or import duty, and all benefit payments made by the SSS shall likewise be exempt from all kinds of taxes , fees or charges and shall not be liable to attachments, garnishments, levy or seizure by or under any legal or equitable process whatsoever, either before or after receipt by the person or persons entitled thereto, except to pay any debt of the member to the SSS. No tax measure of whatever nature enacted shall apply to the SSS, unless it expressly revokes the declared policy of the State in Section 2 hereof granting tax-exemption to the SSS. Any tax assessment imposed against the SSS shall be null and void." (Emphasis supplied) In BIR Ruling No. 042-98 dated April 13, 1998 , where legal opinion was sought on the tax exemption of SSS from the payment of the capital gains tax on the sale of its parcel of land, this Office had settled on the foregoing issue and opined as follows: AaHDSI "In view thereof, the sale of SSS of a parcel of land to you shall be exempt from all kinds of taxes, including capital gains and documentary stamp taxes, pursuant to the afore-quoted Sec. 16 of R.A. 8282. However, since SSS is exempt from the documentary stamp tax imposed under Title VII of the Tax Code, as amended, you, being the other party to the taxable document who is not exempt, shall be the one directly liable to the said documentary stamp tax." In view of the foregoing, the sale of SSS of its real properties to its buyers is exempt from capital gains and documentary stamp taxes pursuant to Section 16 of R.A. No. 8282. However, Section 173, Tax Code of 1997, as amended, provides that " whenever one party to the taxable document enjoys exemption from the tax herein imposed the other party thereto who is not exempt shall be the one directly liable for the tax ." Accordingly, since SSS is exempt from documentary stamp tax, the other party to the taxable document who is not exempt, shall be the one directly liable to the said documentary stamp tax under Section 196 of the Tax Code, 1 as amended. The DST shall be imposed on the actual consideration received by SSS on the sale of its acquired properties. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained 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 Footnotes 1. SEC. 196. Stamp tax on Deeds of Sale and Conveyance of Real Property . On all conveyances, deeds, instruments, or writings, other than grants, patents or original certificates of adjudication issued by the Government, whereby any land, tenement, or other realty sold shall be granted, assigned, transferred or otherwise conveyed to the purchaser, or purchasers, or to any other person or persons designated by such purchaser or purchasers, there shall be collected a documentary stamp tax, at the rates herein below prescribed, based on the consideration contracted to be paid for such realty or on its fair market value determined in accordance with Section 6 (E) of this Code, whichever is higher: Provided, That when one of the contracting parties is the Government the tax herein imposed shall be based on the actual consideration .