Request for Waiver of Penalties on Late Payment of Documentary Stamp Tax on the Auction Sale of Foreclosed Property for the Reason that the Delay is Beyond Control

September 6, 1995 BIR RULING NO. 138-95 204 (2) 000-00 138-95 Social Security System Legal and Collection East Avenue Diliman, Quezon City Attention: Mr . Amador M . Monteiro Asst . Administrator Gentlemen : This refers to your letter dated June 29, 1995 requesting for the following: LibLex 1. For the waiver of penalties on late payment of documentary stamp tax on the auction sale of foreclosed property for the reason that the delay is beyond your control; and 2. That the payment of the said documentary stamp tax be based on the total SSS bid price submitted on the day of auction sale or that the said tax be paid together with the capital gains tax which is also based on the Certificate of Sale It is represented that you are being penalized for not paying your documentary stamp tax within twenty-four (240 hours from the date of the auction sale of foreclosed property; that you cannot possibly meet the said time frame since the Certificate of Sale, which is the basis for payment, is usually issued by the Sheriff's office beyond the said 24-hour period; and that in order not to be burdened by the said penalty, you are requesting either that the payment of the said documentary stamp tax be based on the total SSS bid price submitted on the day of auction sale or that the said tax be paid together with the capital gains tax, which is also based on the Certificate of Sale. In reply, please be informed that as a general rule, payment of the documentary stamp tax (DST) is effected by the purchase, affixture and subsequent cancellation of the documentary stamps (or notation of payment of DST with denomination of P10.00 or more) on the documents AT THE TIME SUCH ACT IS DONE OR TRANSACTION HAD, meaning on the date of execution or signing of the document by the parties thereto, and not at the time of its notarization. Any delay, therefore, in the purchase and affixture (or notation of DST payment, as the case may be), of the documentary stamps on the deeds of sale shall render the same subject to the statutory penalties and interests prescribed under Section 248 and 249 of the Tax Code, as amended. However, in exceptional circumstances where the taxpayer can prove by clear and convincing evidence, other than the Deed of Sale/Transfer, that the delay in the payment of the documentary stamp tax was due to a reasonable and justifiable cause, the Commissioner of Internal Revenue may exercise his/her power to abate an imposition or assessment of penalty pursuant to Section 204 of the Tax Code, as amended. (RMC No. 57-91 dated June 28, 1991) Considering therefore that the reason for the delay in your payment of the DST on the auction sale of your foreclosed properties is beyond your control, i.e., you cannot possibly pay the DST on the said transactions within twenty-four (24) hours from the execution of the auction sale, since the Certificate of Sale, which is the basis for payment, is usually issued by the Sheriff's Office beyond the 24-hour period, your request for waiver of penalties on late payment of DST on the said transactions is hereby granted. As regards the second request that the documentary stamp tax be based on the total SSS bid price, please be informed that under Revenue Memorandum No. 41-91, the 5% capital gains tax and documentary stamp tax on the sale of real property effected through public bidding, e.g. judicial sale or extra-judicial foreclosure sale, shall be based on the highest or winning bid. (BIR Ruling No. 101-89 and 118-91) Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue