BIR Ruling No. 380-13

October 22, 2013 BIR RULING NO. 380-13 Sec. 27 (D) (5); Revenue Ruling No. 13-01; BIR Ruling No. 181-11; BIR Ruling No. 095-11 Office of the Sangguniang Bayan Municipality of Camaligan Province of Camarines Sur Attention: Eduardo C. Loriaga Municipal Vice-Mayor and Presiding Officer Emmanuel T. Prado Municipal Mayor Gentlemen : This refers to your Resolution No. 031 Series of 2012 requesting for a tax exemption from payment of Capital Gains Tax and other penalties which may arise from late filing of the Deed of Exchange executed between the Roman Catholic Archdiocese of Caceres and Municipal Government of Camaligan. The facts as presented are as follows: The Municipality of Camaligan a public corporation created by and under the laws of the Republic of the Philippines, with postal address at Sto. Domingo, Camaligan, Camarines Sur, is the owner of a parcel of lot with TCT No. 611-34 located at Marupit Camaligan, more particularly described as follows: "A Lot (cad. Lot Nos. 1952 and 1953, cad. 516-D) situated at Marupit Camaligan, Camarines Sur bounded on the North, by Lots 1949, 2938, 1955, cad. 516-D; and on the West, by Lot 1950, cad. 516-D containing an area of 4,475 sq. meters, covered by Tax Declaration No. 97-002-0786, assessed at P678,000.00." The Archdiocese of the Roman Catholic Church of Caceres is a corporation sole created by and under the laws of the Philippines, with postal address at the Archbishop Palace, Elias Angeles Street, Naga City, is the owner of parcel lot with OCT No. 17579, more particularly described as follows: "A lot (cad. Lot No. 1338, cad. 516-D) situated at Sto. Domingo, Camaligan, Camarines Sur bounded on the North by lot 1335, cad. 516-D, on the East, by Lots 2849 and 1341, cad. 516-D, on the South, by Lot 1339, cad. 516-D beyond Provincial Road; and on the West, by Lot 1337, cad. 516-D containing area of 2.122 sq. meters." aDHScI On 16 May 2011, a Deed of Exchange was executed between the Municipality of Camaligan and the Archdiocese of the Roman Catholic Church of Caceres , wherein both parties relinquished the ownership of their respective lots in each other's favor without consideration. Both parcels of land are used as cemeteries that had been administered for religious purposes. However, the property being exchanged by the Archdiocese of the Roman Catholic Church of Caceres to LGU Camaligan will be utilized for the construction of the Camaligan People's Market and other projects. On 4 April 2012, the Bureau of Internal Revenue (BIR) Revenue Region No. 10, Revenue District Office (RDO) No. 65, Naga City made an assessment as to the Capital Gains Tax (CGT), Documentary Stamp Tax (DST) and corresponding penalties for late filing of Deed of Exchange with the total amount of Two Hundred Sixty Three Thousand One Hundred Forty Four and 13/100 Pesos (Php263,144.13). The Parties to the Deed of Exchange finding the taxes and penalties due as steep, now request to be exempt from payment of the CGT and other penalties incurred for late filing of the Deed of Exchange. In reply, please be informed that Section 27 (D) (5) of the Tax Code of 1997, as amended provides that a final tax of 6% is imposed on the gains presumed to have been realized from the sale, exchange or other disposition of lands and/or buildings which are not actually used in the business of the corporation and are treated as capital assets, based on the gross selling price or fair market value as determined in accordance with Section 6 (E) of this Code, whichever is higher. (BIR Ruling No. 181-11 dated June 7, 2011 and BIR Ruling No. 095-11 dated April 5, 2011) Notwithstanding the fact that properties subject of the exchange were used for religious purposes and that there was lack of monetary consideration in the execution of the Deed of Exchange between the Municipality of Camaligan and the Archdiocese of the Roman Catholic Church of Caceres , the disposition thereof by the parties shall be subject to 6% CGT pursuant to Section 27 (D) (5) of the Tax Code of 1997, as amended. Properties used for religious purposes are exempt from income tax for use thereof but not on the income derived from its disposition, sale or exchange. On the request for exemption from penalties for late filing of the return, which we consider as an application for abatement of penalties, which the Commissioner has the sole authority to abate or cancel internal revenue taxes, penalties and/or interest based on the grounds enumerated in Section 204 (B), in relation to Section 7 (c) both of the Code, in relation to Section 4 Revenue Regulations No. 13-01. 1 Considering that there appears no factual basis upon which the request for abatement of tax penalties is grounded upon, this office hereby denies the same. In view of the foregoing, the request for exemption from capital gains tax and other penalties is denied for lack of legal and factual basis. 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. SacTCA Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue Footnotes 1. Implementing Section 204 (B), in Relation to Section 290 of the Tax Code of 1997, Regarding Abatement or Cancellation of Internal Revenue Tax Liabilities.