Payment of Capital Gains Tax and Documentary Stamp Tax in Purchase of Property

December 23, 1987 BIR RULING NO. 414-87 21 (e) 313-87 414-87 Gentlemen : This refers to your letter dated September 28, 1987 requesting clarification on the following: "1. Who shall pay the capital gains tax on the property sold by the Philippine Veterans Bank on November 20, 1984, which was before the closure of the bank on April 10, 1985 and before the effectivity date of RMO No. 29-86 on September 3, 1986? The capital gains tax on the said sale has not been paid yet to date since the Certificate of sale has not been registered yet. "2. What is the liability of PVB for documentary stamp tax in the transaction in question and who shall pay it? The Deed of Absolute Sale between the buyer and PVB is silent about it?" In reply, please be informed that considering, that RMO No. 29-86 applies to real property purchased by a bank, finance and insurance company thru mortgage foreclosure sales on or after September 3, 1986 and since the mortgage foreclosure sale in this case was held prior to September 3, 1986, a certificate authorizing the transfer of title to the aforesaid property may be issued to PVB before payment of the capital gains tax. Moreover, while title to the aforesaid foreclosed property can be consolidated in favor of PVB without the prepayment of the capital gains tax prescribed by then Section 34(h)[now Sec. 21(e) of the Tax Code, said tax shall nevertheless be paid and collected from the debtor-mortgagor by the Revenue District Officer of the place where such debtor-mortgagor has his legal residence or principal place of business who shall, for this purpose, conduct the necessary investigation to ascertain the capital gains tax due from the debtor-mortgagor in accordance with the procedure prescribed by Revenue Memorandum Order No. 21-80 dated May 28, 1980. (RMO No. 33-81 as amended by RMO No. 18-82) Furthermore, the subsequent sale of the aforesaid property by PVB on November 20, 1984, is not subject to the 5% capital gains tax, since only individuals including estates and trusts are liable to pay said tax. However, any gain derived by PVB from the said sale should be declared by PVB in its 1984 corporate income tax return. Finally, the sheriff's Deed of Sale as well as the Deed of Sale made and executed on November 20, 1984 are subject to documentary stamp tax and payable by either party to the sale based on the consideration or value received or paid for the land as stated on said Deeds pursuant to Section 209 of the Tax Code, as amended. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner