BIR Ruling No. 191-83

November 15, 1983 BIR RULING NO. 191-83 Gentlemen : This refers to your letter dated October 15, 1983 stating that Martinez Leyba, Inc., a domestic corporation primarily engaged in the business of leasing real property sold its real properties located at the corner of Rizal Avenue and Lope de Vega Sts., Manila, in favor of the Light-Rail Transit Authority for its project. cdt In connection therewith, you request a ruling on the following: "1. Is the aforesaid transactions of real properties owned by the corporation subject to the Capital Gains Tax? and, if not, under what kind of tax is the transaction subject to? "2. For documentary stamp tax purposes of the same transactions, which value shall be the basis (a). The Fair Market value per Tax Declarations, or (b). the considerations embodied in the Deeds of Sale? "3. Is there a need to file the Capital Gains Tax return on the sales transaction entered into? And, should the Capital Gains Tax return be required to be filed and, the filing thereof is late, shall a compromise for late filing be imposed?" In reply thereto, I have the honor to inform you as follows: (1) Revenue Regulations 8-79 implementing Section 34 (h) of the Tax Code, as amended by Batas Pambansa Blg. 37 is explicit that only natural persons or individuals are liable to the final capital gains tax prescribed therein. Such being the case, the gains derived by Martinez Leyba, Inc. from the aforesaid sale of its real properties are not subject to the final capital gains tax prescribed by Section 34(h) of the Tax Code, as amended, but also to the ordinary corporate income tax prescribed under Section 24(a) of the same Code, as amended. (2) The documentary stamp tax due on a deed of conveyance of real property is based on the consideration or value received or contracted to be paid for the realty after making proper allowance of any encumbrance thereon. However, when it appears that the amount of the documentary stamp tax payable has been reduced by an incorrect statement of the consideration in any conveyance, deed, instrument, or writing subject to such tax, the Commissioner, provincial or city treasurer, or other revenue officer shall from the assessment rolls or other reliable source of information, assess the property at its true market value and collect the proper tax thereon. (Sec. 245, Tax Code) (3) Since Martinez Leyba, Inc. is not subject to the capital gains tax prescribed under Section 34 (h) of the Tax Code, it is not required to file a capital gains tax return. cdtech Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner Bureau of Internal Revenue