BIR Ruling No. 199-15

June 10, 2015 BIR RULING NO. 199-15 Section 24 (D) (1) of the Tax Code of 1997, as amended; 000-00 Bienvenido V. Chavez 647 Adela, Camaman-an Cagayan de Oro City Sir : This refers to your letter dated December 12, 2012, duly indorsed by Atty. Bobby V. Dumlao CESO III, Director IV of the Presidential Action Center, requesting for tax amnesty in effecting the transfer of ownership of a parcel of land in favor of the marginalized members. Documents submitted disclosed that on September 19, 1984, Justina R. Jayme and Demetrio S. Jayme sold to Bienvenido V. Chavez, for Ninety Thousand pesos (P90,000.00), two (2) parcels covered by two (2) Transfer Certificates of Title (TCT), to wit; TCT No. Area (sq.m.) Tax Declaration No. T-2077 7,232 22034 1465 1,585 22041 Moreover, on September 26, 1984, an Agreement was executed by and between Bienvenido V. Chavez and Quirino Cabasan et al., 1 whereby the latter shall pay and deliver through the former, their authorized representative, unto the vendros, Justina R. Jayme and Demetrio S. Jayme down payment equivalent to 50% (P50,000.00) 2 and the balance shall be paid by them not later than December 21, 1984. It is further represented that the land is now covered by TCT No. T-143217 registered under the name of Bienvenido V. Chavez and that the association is now in the process of subdividing the purchased property to its 46 members. In reply, please be informed that at present, there is no law granting tax amnesty. As a general rule, conveyances of real properties are subject to capital gains tax (CGT) imposed under Section 24 (D) (1) of the Tax Code of 1997, as amended, provides: "SEC. 24. Income Tax Rates . xxx xxx xxx (D) Capital Gains from Sale of Real Property . (1) In General . The provisions of Section 39(B) notwithstanding, a final tax of six percent (6%) based on the gross selling price or current fair market value as determined in accordance with Section 6(E) of this Code, whichever is higher, is hereby imposed upon capital gains presumed to have been realized from the sale, exchange, or other disposition of real property located in the Philippines, classified as capital assets, including pacto de retro sales and other forms of conditional sales, by individuals, including estates and trusts: . . . ." SaCIDT xxx xxx xxx The subject transfer, being a disposition of real property under Section 24 (D) (1) of the Tax Code of 1997 enumerated above, is subject to the CGT of 6% on the capital gains presumed to have been realized from the said conveyance of real property considered as capital assets. It is likewise subject to documentary stamp taxes (DST) imposed under Sections 196 and 188 of the Tax Code of 1997. It is noted that there is no showing that Bienvenido V. Chavez was constituted as Attorney-in-Fact or agent of the 21 individuals to buy the properties from the Jayme spouses, that will constitute as trust agreement and it is gleaned from the records, that the Agreement (September 26, 1984) was executed subsequent to the sale transaction (September 19, 1984). It should be remembered that laws and statutes granting tax exemptions are strictly construed against the taxpayer. Exemptions are never presumed and the burden is upon the taxpayer to establish his right to exemption beyond reasonable doubt. 3 In the case of Mactan Cebu International Airport Authority v. Marcos , 4 the Supreme Court held: "Accordingly, tax statutes must be construed strictly against the government and liberally in favor of the taxpayer. But since taxes are what we pay for civilized society, or are the lifeblood of the nation, the law frowns against exemptions from taxation and statutes granting the exemptions are thus construed strictissimi juris against the taxpayer and liberally in favor of the taxing authority. A claim of exemption from tax payments must be clearly shown and based on language in the law too plain to be mistaken. Elsewise stated, taxation is the rule, exemption therefrom is the exception." In view of the foregoing, this Office regrets to deny your request for tax amnesty for lack of legal basis. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue Footnotes 1. Rolando Lim, Saturnino Melencion, Delfino Catamco, Felomino Tacandog, Martin Salise, Nilo Rosales, Lilia Rosales, Juanito Canete, Victor Abejo, Belen Bacangoy, Nicanor Gayramon, Fructosa Sison, Cecilio Dondiego, Enriquita S. Chavez, Consolacion Escobal, Merla Melloren, Juan Palla, Rufa Dosol, Francisco Piquetpiquet and Regalado Tolinero, Sr. 2. P urchase price for the two (2) lots is One Hundred Thousand pesos (P100,000). 3. Dimaampao, Japar B., Tax Principles and Remedies, Second Edition (2005). 4. G.R. No. 120082, 11 September 1996, 261 SCRA 667.