Computation of the Capital Gains Tax and Documentary Stamp Tax Due on the Deed of Absolute Sale

October 26, 1989 BIR RULING NO. 218-89 21 (e) 000-00 218-89 S i r : This refers to your letter dated August 15, 1989 requesting, in effect, a ruling as to which provision of law or regulation shall apply in computing the capital gains tax and documentary stamp tax due on the Deed of Absolute Sale executed in favor of your client, E.M. Ramos & Co., Inc. on March 10, 1971 and notarized on June 8, 1973. In reply, please be informed that under Article 1358(i) of the Civil Code the sale property or of an interest therein must appear in public instrument. When the sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed of contrary does not appear or cannot be clearly inferred. (Art. 1498, Civil Code). Obviously the date of execution of a public instrument is the date of notarization because it is notarization that makes a Deed of Sale a public instrument. Such being the case, since the sale of real property should be in a public instrument, and the date of notarization was on June 3, 1973, the pertinent provisions of the National Internal Revenue Code in force on the said date should be applied in determining the taxable gain derived by the seller on the aforesaid sale transaction for purposes of computing the capital gains tax and documentary stamp tax due thereon. These provisions are Sections 34 and 35 of the Tax Code, prior to the insertion of Section 34(h) by Batas Pambansa Blg. 37 effective September 7, 1979 covering the capital gains tax. As regards the documentary stamp tax, the rates then in force on June 3, 1973 should be applied, i.e. P0.75 if the consideration exceeds P200 but does not exceed P1,000 and P3.00 for each additional P1,000 or fractional part thereof in excess of P1,000 of said consideration pursuant to then Section 233 of the Tax Code. (BIR Ruling No. 453-88). Very truly yours, (SGD.) JOSE U. ONG Commissioner