Basis in Computing Documentary Stamp Tax to Be Paid by PNB in a Tax Auction Sale Wherein it is the Highest Bidder

September 30, 1986 BIR RULING NO. 204-86 209 010-86 204-86 Gentlemen : This refers to your letter dated May 21 and August 6, 1986 requesting clarification as to the correct basis in computing the amount of documentary stamp tax to be paid by Philippine National Bank (PNB) in a tax auction sale wherein it is the highest bidder, i.e., whether the tax will be based on the amount of P3,302,553.16 which represents the delinquent realty taxes, penalties and cost of sale paid by the purchaser bank (who is also the mortgagee of such property) or on the fair market value of the property sold. It appears that PNB is a mortgagee of a real property owned by Asiatic Integrated Corporation (AIC) located in Quiapo, Manila referred to as Cinerama property covered by TCT Nos. 112506, 112507, 112508 and 112509 having a fair market value of P73,744,830.00; that on November 29, 1983, the said property was sold at public auction by the City of Manila, thru the Office of the City Treasurer, to satisfy AIC's delinquent realty taxes, that in the said public auction sale, PNB was the highest bidder for which it paid the amount of P3,302,553.16 representing the delinquent realty taxes, penalties and cost of sale; that since the period to redeem said property had expired last January 6, 1985, PNB started consolidating the property in its name; that on March 15, 1985, PNB filed an "Individual Capital Gains Tax Return" and paid documentary stamps of P33,060.00 under RTR No. B5914050 and CR No. B7049081 both dated August 16, 1985 computed on the basis of the auction price of P3,302,553.16; and that the final Bill of Sale in favor of PNB was executed on March 31, 1986. cdti In reply, please be informed that under Section 171 of Regulations No. 26 or the Documentary Stamp Tax Regulations reading: "Sec. 171. Tax on Deed Executed by Sheriff , Referee , or Commissioner , How Computed . The stamp tax on a deed of real property executed by a sheriff, referee, or commissioner to a mortgagee who bids in the property at foreclosure sale to satisfy a mortgage loan should be computed upon the amount bid for the property plus costs, if paid by the purchaser." the consideration or value received or paid for the land shall be the basis in determining the value of the documentary stamp tax to be on the document of foreclosure. Since the bid price constituted as the consideration for the conveyance of the property from the debtor-mortgagor to the creditor-mortgagee, then such bid price should be the amount that should be taken into account in determining the value of the documentary stamp tax to be paid on the document of foreclosure. If cost of foreclosure was paid by purchaser in said sales then this amount should also be taken into account in the computation of the documentary stamp tax due. (BIR Ruling No. 10-86 dated January 31, 1986). Accordingly, the amount that should be taken into account in determining the value of the documentary stamp tax to be paid by PNB who is the highest bidder on the tax auction sale in question should be based on the bid price of P3,302,558.16 since it constituted as the consideration of the conveyance of the property from the delinquent taxpayer-mortgagor (AIC) to the purchaser-mortgagee (PNB). cd Very truly yours, (SGD.) ROMULO M. VILLA Acting Commissioner