BIR Ruling No. 571-12

September 19, 2012 BIR RULING NO. 571-12 RA 6657; BIR Ruling No. 012-01 Benilda S. Navarro 58 V. Victorio St., Mandaluyong City Madam : This refers to your undated letter duly indorsed by the Regional Director of Revenue Region No. 5-Caloocan, requesting that the disturbance compensation in the form of lot to Diego Gimeno is exempt from taxes and all other fees. It appears that Belinda S. Navarro, Manolette S. Navarro, Bernadette S. Navarro, Ronnolette S. Navarro, Lynnenette S. Navarro and Loulette S. Navarro are the registered owners of a parcel of land, identified as Lot 3 of the cons. Subd. plan Pcs-03-009763 being a portion of cons. Lots 1099 & 2911 S.M. de Pandi Est. LRC Rec. No. covered by Transfer Certificate of Title (TCT) No. T-366583 (M) issued by the Registry of Deeds for the Meycauayan Branch. The aforesaid property is situated at Brgy. Guyong, Sta. Maria, Bulacan with an area of three thousand two hundred forty four square meters (3,244 sq.m.), more or less. On June 14, 2011, A Deed of Assignment was executed whereby the owners thru their Attorney-in-Fact, Belinda S. Navarro transfer and convey by way of disturbance compensation to Diego Gimeno the whole area of the above-mentioned property. In reply, please be informed that since the conveyance of the owners thru their Attorney-in-Fact, Belinda S. Navarro 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. : EAHcCT "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." (BIR Ruling No. 012-01 dated March 14, 2001) Attached to the records is a Certification dated 18 June 2012 from the Municipal Agrarian Reform Offices (MARO) of Sta. Maria, Bulacan, certifying that the subject property was verified as disturbance compensation of tenant Diego Gimeno 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, as in this instance, is still considered one of the transactions contemplated under Section 66 of RA 6657. 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