Mun. of Kawit Exempt from Capital Gains Tax

May 5, 1993 BIR RULING NO. 184-93 MUN. OF KAWIT EXEMPT FROM CAPITAL GAINS TAX 21 (e) (24) (c) 011-91 184-93 Atty. Federico A. Poblete Municipal Mayor Kawit, Cavite This refers to your letter dated October 20, 1992, addressed to the Honorable Secretary of Justice, who referred the same to the Honorable Secretary of Finance, and who in turn referred it to this Office, relative to your request for opinion as to whether or not the exemption from real property tax of a local government unit (LGU) under Article 325(a), Rule XXXI, R.A. 7160, carries with it exemption from payment of the capital gains tax. In reply, please be informed that under Section 21(e) of the Tax Code, as amended, only individuals, including estates and trusts shall be taxed on the gains presumed to have been realized from the sale, exchange or other disposition of real property located in the Philippines classified as capital assets, at the rate of 5% based on the gross selling price or the fair market value prevailing at the time of sale, whichever is higher. Accordingly, the Municipality of Kawit, not being an individual, estate or trust, is not subject to the 5% capital gains tax on its sale of real property even without Article of 325(a), Rule XXXI of the Local Government Code. However, Presidential Decree Nos. 1177 and 1931, as well as Executive Order No. 93, have withdrawn the tax and duty exemption privileges, including the preferential tax treatment of all units of government, i.e., the National Government, its agencies and subdivisions, as well as the government-owned and controlled corporations. Accordingly, your municipality's sale of real property is subject to the creditable withholding tax, pursuant to Revenue Regulations No. 12-89, as amended by Revenue Regulations No. 1-90, implementing Section 50(b) of the Tax Code, and the corporate income tax that will have to be paid upon the filing of the municipality's income tax return for the year the property was sold. aisadc VICTOR A. DEOFERIO, JR. Deputy Commissioner of Internal Revenue