Exemption from the Payment of the Capital Gains Tax and DST

June 28, 1988 BIR RULING NO. 273-88 24 (a) 000-00 273-88 Gentlemen : This refers to your request for exemption from the payment of the capital gains tax and the documentary stamp tax as contained in your letter dated June 3, 1987, to your Branch Office Head at Tacurong, Sultan Kudarat, in order that you may be able to register foreclosed real properties formerly owned by Mindanao Progress Corporation (MINPROCOR). cdti It is disclosed that certain real properties located at Tacurong, Sultan Kudarat, covered by TCT Nos. T-7905, T-7970, T-24043, T-24679 and T-25251 issued in the name of Roberto Tulio were acquired from him by MINPROCOR; that an Affidavit of Non-Redemption for Consolidation of Ownership was executed on May 26, 1987 by a responsible officer of that Bank stating that said properties have been foreclosed by DBP through an extrajudicial foreclosure sale on May 18, 1977 for which the corresponding Sheriff's Certificate of Sale had been issued and registered with the Register of Deeds Office; that the period of one year from and after the dated of registration of the Sheriff's Certificate of Sale had expired on May 24, 1978, and the person having a lien or interest on the properties subsequent to the mortgage of the DBP having failed to exercise the right of redemption as provided under Act 3135; that on account of said non-redemption, DBP by operation of law became the lawful and absolute owner of said properties; and that since the foreclosed account of MINPROCOR with DBP has been transferred to the National Government thru the Asset Privatization Trust (APT), pursuant to Proclamation No. 50, the aforesaid properties are now the assets of APT. In reply, please be informed that the effect of non-payment of capital gains tax, documentary stamp tax, and other similar taxes for that matter to the consolidation of title in the foreclosing institutions is provided in Section 35 of Proclamation No. 50 stated as follows: "Sec. 35. Exemption from Taxes, Fees, and Other Charges . The provisions of any law to the contrary notwithstanding, the Trust as well as the corporation and assets held by it, shall be exempt from all taxes , fees, charges, imposts, and assessments arising from or occasioned by the passing of title over such corporations or assets from the government institutions to the Trust and/or from the Trust to a private acquisitor or buyer imposed by the National Government or any subdivision thereof including but not limited to stock transfer taxes, capital gains taxes, documentary stamps , registration fees and the like: Provided, that in case the said government institutions acquired the said assets by foreclosure, the non-payment of similar taxes , fees, charges, imposts, and assessments shall not be a bar to the consolidation of title in the foreclosing institutions and the subsequent passing of title to the Trust or the corporations held by the Trust . The sale or transfer of such corporations or assets shall not be enjoined or hindered by the existence of any liens by way of taxes, charges or other assessments in favor of the government at the time of sale or transfer: Provided, that the proceeds from such sale or transfer shall be subject to a tax lien and shall first be applied to satisfy such obligations secured by said liens." (Emphasis supplied) Accordingly, under the above-quoted provision, while taxes may be due from the transferor (MINPROCOR), non-payment of taxes by said transferor shall not bar the consolidated of title in the foreclosing institution. Moreover, APT as well as said properties are exempt from taxes arising from or occasioned by the transfer of title from DBP to APT. Such being the case, the aforesaid real properties may be consolidated in the name of DBP and thereafter transferred to APT without the prior payment of capital gains tax and documentary stamp tax. This serves as the authority to cause the registration of the above-described properties in the name of that Bank and, thereafter to APT without the prior payment of capital gains and documentary stamp taxes. cdtech Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner