BIR Ruling No. 222-13

June 18, 2013 BIR RULING NO. 222-13 RA 6657; BIR Ruling No. 012-01 Evangelina A. Estrella n Poblacion, Pandi, Bulacan Madam : This refers to the 1st indorsement of Revenue Region 5 Caloocan, requesting that the disturbance compensation in the form of lot is exempt from taxes and all other fees. cDAITS It appears that Mariano Santiago married to Perlita Santiago, Felicisimo Santiago married to Lucita Santiago, Sixto Santiago married to Sonia Santiago and Carolina S. Martin are the registered owners of a parcel of land, identified as Lot 2335-B of the subd. plan Psd-15886, being a portion of lot 2335, of the Sra. Maria de Pandi Est., LRC (GLRO) Rec. No. 8509 covered by Transfer Certificate of Title (TCT) No. T-305923 (M) issued by the Registry of Deeds for the Province of Bulacan; that the aforesaid property is situated at Poblacion, Pandi, Bulacan with an area of sixteen thousand three hundred six square meters (16,306 sq.m.), more or less; that the above mentioned property was subdivided into three (3) lots under the Subdivision Plan (LRA) Psd-420293, as follows: a) Lot 2335-B-1 1,410 square meters b) Lot 2335-B-2 5,000 square meters c) Lot 2335-B-3 9,896 square meters and that on December 16, 2011, a Deed of Absolute Sale of Real Property with Deed of Assignment was executed whereby Mariano Santiago married to Perlita Santiago through their attorney in fact, CA Justice Jose C. Dela Rama (ret.), Felicisimo Santiago married to Lucita Santiago, Sixto Santiago and Carolina S. Martin-Gamboa through her attorney in fact, Nellie Martin transfer and convey, to the following: a) Danilo S. Santos married to Genevere A. Serna-Santos and Alma S. Santos-De Jesus married to Reynaldo A. De Jesus Lot 2335-B-1 and Lot 2335-B-3 consisting of 1,410 and 9,896 square meters, respectively, at an agreed price of Nine Hundred Five Thousand Pesos (P905,000.00), by way of absolute sale. b) Evangelina A. Estrella by way of disturbance compensation Lot 2335-B-2 consisting of 5,000 square meters, as the agricultural lessee thereof. Moreover, the Capital Gains Tax and Documentary Stamp Tax on the sale of the properties in favor of Danilo S. Santos and Alma S. Santos-De Jesus have been paid as shown in Revenue Official Receipt (BIR Form No. 2524) dated on January 5, 2012. The present request for exemption pertains to the conveyance or transfer of the land in favor of Evangelina A. Estrella by way of disturbance compensation as tenant-beneficiary thereof. In reply, please be informed that the conveyance by the owner of the land in the form of disturbance compensation, is exempt from capital gains tax and documentary stamp tax pursuant to Section 66 of Republic Act No. 6657 otherwise known as the "Comprehensive Agrarian Reform Law of 1988" which provides, viz. : ASDCaI "Sec. 66. Exemption from Taxes and Fees of Land Transfers . Transactions under this Act involving a transfer of ownership, whether from natural or juridical persons, shall be exempted from taxes arising from capital gains. These transactions shall also be exempted from the payment of registration fees, and all other taxes and fees for the conveyance or transfer thereof. Provided, That all arrearages in real property taxes, without penalty or interest, shall be deductible from the compensation to which the owner may be entitled." Attached to the records is a Certification dated 6 June 2012 from the Municipal Agrarian Reform Office (MARO) of Pandi, Bulacan, certifying that the subject property was verified as disturbance compensation of tenant Evangeline A. Estrella pursuant to RA 6657 (CARP Law). Additionally, a Certification, date 17 July 212, n from Provincial Agrarian Reform Office (PARO) of Baliuag, Bulacan supports the said MARO certificate. It is noted that Section 36 (1) of RA 3844, as amended, allows disturbance compensation to a tenant in case of termination of tenancy-relationship by reason of the conversion of the agricultural land into non-agricultural uses. Only Section 35 of RA 3844 was expressly repealed by RA 6657 or the CARP Law. Thus, transfer of land to a tenant by way of disturbance compensation, as in this instance, is still considered one of the transactions contemplated under Section 66 of RA 6657. Accordingly, the transfer by the owners of Lot 2335-B-2 consisting of 5,000 square meters to Evangelina A. Estrella of the above-mentioned property in the form of disturbance compensation is exempt from capital gains tax and documentary stamp tax pursuant to the aforecited provision. (BIR Ruling No. 012-01 dated March 14, 2001) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue n Note from the Publisher: Also referred to as "Evangeline A. Estrella". n Note from the Publisher: Copied verbatim from the official copy.