BIR Ruling No. 132-15

April 30, 2015 BIR RULING NO. 132-15 RA 6657; BIR Ruling No. 350-13 Celso S. Lazaro, Sr. No. 57 Dangay St., Veterans Village Quezon City Sir : This refers to the 2nd Indorsement of Revenue Revenue n No. 5-Caloocan City dated January 4, 2012 relative to the request for confirmation that the disturbance compensation in the form of land granted to Jose Baltazar is exempt from taxes and all other fees. Documents submitted disclose that Celso S. Lazaro, Sr. is the registered owner of a parcel of land, identified as Lot 7, plan, Psu-154138, LR Case No. N-882, LRC Rec. No. N-12636 covered by Transfer Certificate of Title (TCT) No. T-263361 which is issued by the Registry of Deeds for the Province of Bulacan. The aforesaid property is situated at Brgy. Paltao, Pulilan, Bulacan with an area of twenty seven thousand two hundred seven square meters (27,207 sq.m.), more or less. On July 20, 2010, a "Kasulatan ng Pagsalin ng Karapatan at Pag-mamay-ari ng Isang Lagay ng Lupa" was executed, whereby the owner transferred and conveyed, by way of disturbance compensation, to Jose Baltazar six thousand eight hundred one square meters (6,801 sq.m.) portion of the above-mentioned property (now: TCT No. 275632, identified as Lot 7-A of the subd. plan Psd-03-169537 being a portion of Lot 7, Psu-154138, as a result of the extinguishment of tenancy relationship between the parties. Certification No. 1146-13 dated October 2, 2013 was issued by Provincial Agrarian Reform Office (PARO) of Bulacan, stating that the six thousand eight hundred one square meters (6,801 sq.m.) covered by TCT No. T-275632 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 brought by the extinguishment of tenancy relationship between the parties, 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 .: HTcADC "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 October 2, 2013 from the PARO, Bulacan, certifying that the Lot 7-A, Psd-03-169537 with an area of six thousand eight hundred one square meters (6,801 sq.m.) covered by TCT No. T-275632 was verified as disturbance compensation of tenant, Jose Baltazar pursuant to 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. 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 due to extinguishment of tenancy relationship between the parties, as in this instance, is still considered one of the transactions contemplated under Section 66 of RA 6657. Accordingly, the transfer by the owner of six thousand eight hundred one square meters (6,801 sq.m.) covered by TCT No. T-275632 in the form of disturbance compensation is exempt from capital gains tax and documentary stamp tax pursuant to the aforecited provision. (BIR Ruling No. 350-13 dated September 11, 2013) 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 n Note from the Publisher: Copied verbatim from the official copy. "Revenue Revenue" should read as "Revenue Region".