Taxability of the Revaluation Increment in Property for Corporate Income Tax Purposes

December 28, 1992 BIR RULING NO. 375-92 34 375-92 Philippine Savings Bank PSBank Building Ayala Avenue corner Salcedo Street Makati, Metro Manila Attention: Ms . Edel Mary D . Vecamora Assistant Comptroller Gentlemen : This refers to your August 6, 1992 letter requesting for clarification on the taxability (for corporate income tax purposes) of the revaluation increment in property. It is represented that revaluation increment is booked by an entity, like a bank, when it elects to revalue bank premises and other property and equipment through appraisal by reputable experts or specialists; and that such revaluation increment when booked increases the stockholder's equity of an entity. In reply, please be informed that the difference between the assessed value of a real property and the actual cost of such property does not constitute taxable income unless and until there has been a sale or exchange of such property in which case the gain, if any, constitutes taxable income. Likewise, the excess of the appraised value of the property over its net book value is not subject to corporate income tax, there being no income realized on account of the appraisal of the property. Very truly yours, JOSE U. ONG Commissioner of Internal Revenue