BIR Ruling No. 247-13

July 8, 2013 BIR RULING NO. 247-13 RA 6657; BIR Ruling No. 012-01 Evelyn F. Roque 1134 A. Maceda, Sampaloc, Manila Madam : This refers to the 2nd Indorsement of Revenue Region 5 Caloocan dated August 17, 2012 relative to your request for confirmation that the disturbance compensation in the form of land granted to Amelia L. Castillo is exempt from taxes and all other fees. Documents submitted disclose that Evelyn F. Roque is the registered owner of a parcel of land, identified as Lot No. 2201 of the Cad. Survey of Baliuag covered by Transfer Certificate of Title (TCT) No. T-171605 which is issued by the Registry of Deeds for the Province of Bulacan. The aforesaid property is situated at Baliuag, Bulacan with an area of four thousand seven hundred forty two square meters (4,742 sq.m.), more or less. On May 3, 2012, a Deed of Assignment (Disturbance Compensation) was executed whereby the owner transfers and conveys by way of disturbance compensation to Amelia De Leon Castillo the whole area of the above-mentioned property. Certification No. 059-2012 was issued by Provincial Agrarian Reform Office of Bulacan, stating that the property covered by TCT No. T-171605 is actually a disturbance compensation and that the property is cleared for registration. In reply, please be informed that since the conveyance of the owner is in the form of disturbance compensation, the transfer 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. : "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." AICDSa Attached to the records is a Certification dated 15 October 2012 from the Provincial Agrarian Reform Offices (PARO) of Bulacan, certifying that the subject property was verified as disturbance compensation of tenant Amelia De Leon Castillo pursuant to RA 3844 (Agricultural Land Reform Code) and RA 6657 (CARP Law). Be it 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 owner of the whole area 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