BIR Ruling No. 288-14

July 9, 2014 BIR RULING NO. 288-14 RA 6657; BIR Ruling No. 012-01 Felecisima R. Ignacio Tilapayong, Baliwag, Bulacan Madam : This refers to the 2nd Indorsement of Revenue Region 5-Caloocan dated April 29, 2013 relative to your request for confirmation that the disturbance compensation in the form of land granted by Luciana Tiongson Reyes to Felecisima R. Ignacio is exempt from taxes and all other fees. Documents submitted disclose that Luciana Tiongson Reyes is the registered owner of a parcel of land, identified Lot 2673-B-2-F of the subd. Plan Psd-03-175244 (being a portion of Lot 2673-B-2 Psd-03-0928-95 LRC Rec. No.) covered by Transfer Certificate of Title (TCT) No. 286219 which is issued by the Registry of Deeds for the Province of Bulacan. The aforesaid property is situated at Tilapayong, Baliwag, Bulacan with an area of four thousand three hundred twenty five square meters (4,325 sq.m.), more or less. On March 8, 2013, a Deed of Conveyance was executed whereby the owner transferred and conveyed, by way of disturbance compensation, to Felecisima R. Ignacio the whole area of the above-mentioned property, as a result of the extinguishment of tenancy relationship between the parties. Certification No. 296'13 was issued by Provincial Agrarian Reform Office (PARO) of Bulacan, stating that the property covered by TCT No. 286219 is actually a disturbance compensation under Section 66 of Republic Act (RA) No. 6657. In reply, please be informed that since the conveyance of the owner is in the form of disturbance compensation brought by the extinguishment of tenancy relationship between the parties, the transfer is exempt from capital gains tax and documentary stamp tax pursuant to Section 66 of RA No. 6657 otherwise known as the "Comprehensive Agrarian Reform Law of 1988" which provides, viz. : IHEDAT "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 20 March 2013 from the PARO of Bulacan, certifying that the subject property was verified as disturbance compensation of tenant Felecisima R. Ignacio 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 due to extinguishment of tenancy relationship between the parties, as in this instance, is still considered one of the transactions contemplated under Section 66 of RA 6657. Accordingly, the transfer by the owner, Luciana Tiongson Reyes, of the whole area of the above-mentioned property to Felecisima R. Ignacio 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