BIR Ruling No. 570-12

September 19, 2012 BIR RULING NO. 570-12 RA 6657; BIR Ruling No. 012-01 Michelle Janice E. De Guzman 187 J.P. Rizal Street, Binang 2nd Bocaue, Bulacan Madam : This refers to your letter dated January 30, 2012, requesting that the disturbance compensation in the form of lot to Milagros D.C. Ramos, Eduardo S.J. dela Cruz & Soledad D.C. Termullo is exempt from taxes and all other fees. It appears that Michelle Janice E. De Guzman is the registered owner of a parcel of land, identified as Lot 17-E-2 of the subd. plan Psd-031404-062523, being a portion of Lot 17-E, Psd-26727 L.R.C. Rec. No. covered by Transfer Certificate of Title (TCT) No. T-215906 (M) issued by the Registry of Deeds for the Province of Bulacan. The aforesaid property is situated at Brgy. Igulot, Bocaue, Bulacan with an area of one thousand eight hundred thirty two square meters (1,832 sq.m.), more or less. On July 15, 2011, "KASULATAN NG PAGLILIPAT NG ISANG LAGAY NA LUPA KAPALIT NG PAG-SASAULI NG KARAPATAN SA PAGSASAKA was executed whereby the owner transfers and conveys by way of disturbance compensation to Milagros D.C. Ramos, Eduardo S.J. dela Cruz & Soledad D.C. Termullo of the whole area of the above-mentioned property. In reply, please be informed that since the conveyance of the owner is in the form of disturbance compensation, the transfer is exempt from capital gains tax and documentary stamp tax pursuant to Section 66 of Republic Act No. 6657 otherwise known as the "Comprehensive Agrarian Reform Law of 1988" which provides, viz. : TaSEHD "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 12 February 2012 from the Municipal Agrarian Reform Offices (MARO) of Bocaue, Bulacan, certifying that the subject property was verified as disturbance compensation of tenants Milagros D.C. Ramos, Eduardo S.J. dela Cruz & Soledad D.C. Termullo 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 tenants by way of disturbance compensation, as in this instance, is still considered one of the transactions contemplated under Section 66 of RA 6657. Accordingly, the transfer by the owner of the whole area of the above-mentioned property 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