The Proper Tax Base for Internal Revenue Tax Purposes is the Actual Selling Price, Fair Market Value, or Zonal Value, Whichever is Higher

December 4, 1996 BIR RULING NO. 136-96 16 (d) 000-00 136-96 Miguel Q. Baron Tax and Investment Counsellor 2560 Los Tamaraws Street, Sunset Village Tambo, Paraaque, Metro Manila Attention: Miguel O . Baron Tax Counsel Gentlemen : This refers to your letter dated November 4, 1996 stating that sometime in September 1996, you accompanied some responsible officers of your client, the KAWASAKI MOTORS (PHILS.), INC. with principal office at Km. 23 Cupang, City of Muntinlupa, to consult with Atty. Dominador Galura, Assistant BIR Commissioner for Assessment and Chairman of the Technical Committee on Real Property Valuation and Ms. Esperanza Tee, Chief of the Asset Valuation Division, as to the correct zonal value of your clients industrial land located at Km. 23, Cupang, City of Muntinlupa; that you informed both Atty. Galura and Ms. Tee that your clients property is within the vicinity of the railroad very near the Tuklas Compound with a zonal value of P1,600 per sq. m.; that while the Tuklas Compound is classified as residential, your client's property is classified as industrial land in Barangay Cupang; that on October 1, 1996, your client, the KAWASAKI MOTORS (PHILS.), INC. sold two parcels of land located in the City of Muntinlupa, covered by TCT No. S-55683 and TCT No. S-49698, issued by the Registry of Deeds for the Metro Manila District IV, containing, respectively, an area of 19,364 and 2, 096 sq. m. to KMPC Realty Corp. for a total consideration of P41, 847,000.00, at P1,950 per sq. m. ; that your client could have availed of the provisions of Sec. 34 ( c ) of the NIRC, for a tax-free exchange but opted to recognize the gain so that the cost basis on the part of the buyer may be established with certainty; that your client paid at the BIR, Revenue District Office No. 53 (Las Pias-Muntinlupa) the 71/2% withholding tax amounting to P3, 138, 524 and documentary stamp tax of P627, 705.00; that in accordance with BIR Ruling No. 010-87 dated January 14, 1987, your client's Accounting Manager and Internal Auditor requested the Revenue District Officer or his duly authorized representative for a certification that the documentary stamp tax have been paid on the Deed of Sale and the evidence of said payment had been stated on all copies of the document; that to your client's surprise and confusion, the Revenue District Officer refused to issue the certification requested but instead, the RDO issued three (3) conflicting assessments as follows: cdti OCTOBER 21, 1996 OCTOBER 22, 1996 OCTOBER 22, 1996 Def. 7 /21 w/holding tax P3, 299, 475.00 P5, 552, 775.00 P11, 346, 975.00 Def. Doc. Stamp Tax 659, 895.00 11, 110, 555.00 2, 269, 395.00 TOTAL DUE & P3, 959, 370.00 P6, 663, 320.00 P13, 616, 370.00 COLLECTIBLE Based on the foregoing facts, you request confirmation of your opinion that the zonal value of P1,950.00 per square meter is the correct tax base in computing the internal revenue tax due on the sale by Kawasaki Motors (Phils.) Inc., to KMPC Realty Corp. of two parcels of land located in Muntinlupa City covered by TCT No. 55683 and TCT No. S-49698 issued by the Registry of Deeds for Metro Manila District No. IV and that, since your client is a corporation it is not required to secure tax clearance certificate to effect the registration of the aforesaid sale of real property in favor of KMPC. In reply, please be informed that pursuant to Revenue Memorandum Order No. 41-91, the proper tax base for internal revenue tax purposes is the actual selling price, fair market value, or zonal value, whichever is higher. In the instant case, since there is no strong evidence to support the contrary view that the actual selling price, fair market value, or zonal value of the subject real properties are higher than P1, 950 per square meter, the adverted zonal value should be adopted as the correct value for all internal revenue tax purposes. Pursuant to BIR Ruling No. 120-95, if no zonal value has been prescribed for a particular classification of real property in one Barangay, the zonal value prescribed for the same classification of real property located in an adjacent barangay of similar conditions shall be used. Hence, given the fact that said valuation was uncontradicted, and based thereon the 7.5% creditable withholding tax and documentary stamp tax were computed and paid in accordance with Revenue Regulations No. 12-94 and Revenue Memorandum Circular No. 44-86, respectively, while a tax clearance certificate is required, it should have been issued as a matter of course pursuant to Section 5 of Revenue Regulations No. 11-96. This serves as your authority to secure the issuance of a Tax Clearance Certificate to effect the registration of the subject real properties. This ruling is being issued on the basis of the foregoing representations and will be considered null and void if the facts are not as represented. LLphil Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue