Applicability of the Zonal Valuation Scheme

May 4, 1988 BIR RULING NO. 174-88 21 (a) 000-00 174-88 S i r : This refers to your letter dated March 18, 1988 requesting in behalf of your client, Ms. Eleonora de Guzman, a ruling as to whether the applicability of the zonal valuation scheme depends on the date of payment of the capital gains tax or on the date of execution of the deed of sale of real property. cdtech It is represented that your abovementioned client sold a Condominium Unit in Makati, located along Pasong Tamo Avenue, Makati on March 3, 1987; that it was only last January 29, 1988 that she applied for payment of capital gains tax and the corresponding certificate authorizing transfer of title to real property; and that the Revenue Examiner of Revenue District Office (Makati West) informed your client that the capital gains tax shall be computed using the zonal valuation scheme presumably under Revenue Audit Memorandum Order No. 3-87 which took effect last June 3, 1987. In reply, please be informed that the 5% capital gains tax is based on the gross selling price or the fair market value prevailing at the time of sale , whichever is higher. [Sec. 12(e), Tax Code] Accordingly, considering that zonal valuation has been determined for the purpose of establishing a more realistic basis for real property valuation and since internal revenue taxes, one of which is capital gains tax, shall be assessed on the basis of said zonal valuation, it is clear that the zonal valuation existing at the time of sale should be taken into account. Such being the case, and as the sale of the above property occurred on March 3, 1987, the zonal valuation prescribed in Revenue Audit Memorandum Order No. 3-87 which took effect on June 3, 1987, cannot be applied. In this connection, it appears that the zonal valuation in force during the time of safe in this case is that provided under Revenue Audit Memorandum Order No. 3-86, as amended by Revenue Audit Memorandum Order No. 3-86A. cdt Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner