BIR Ruling No. OT-354-2022

July 26, 2022 BIR RULING NO. OT-354-2022 Sec. 205 (a) of the Tax Code of 1997, as amended; RMC No. 41-2019; 000-00 Mimosa E. Lopez _______________ _______________ Madam : This refers to your request for the lifting of the Notice of Tax Lien, Notice of Levy and Declaration of Forfeiture of Real Property on Transfer Certificate of Title (TCT) No. _______, which were annotated by this Bureau, purposely to secure the tax liability of the previous owner. Based from the documents submitted, you bought a Five Hundred-Square Meter (500 sq. m.) parcel of land from Mr. Herrera (Mr. Herrera) for a consideration of _____________________________ on August 5, 2004, the land is registered under TCT No. ________ which is located in Santa Ines, San Miguel, Bulacan. It was verbally agreed upon that Mr. Herrera would be the one to facilitate the transferring of the said TCT in your name. Without your knowledge, Mr. Herrera executed a subsequent deed of absolute sale on the said parcel of land purportedly to lessen the amount of capital gains tax (CGT) and documentary stamp tax (DST). On October 9, 2006, TCT No. T_______ was issued by the Registry of Deeds of Bulacan in your name but with annotations of the following encumbrances, viz. , " Notice of Tax Lien, date of inscription May 3, 2005; Notice of Levy, date of inscription March 17, 2006; Declaration of Forfeiture of Real Property, date of inscription October 10, 2006 ." You then inquired before the Bureau of Internal Revenue about the annotations and learned of the tax liabilities of Mr. Herrera. You were then requested by the Bureau to secure the Certificate Authorizing Registration (CAR), the Deed of Sale and other documents Mr. Herrera had submitted to the Registry of Deeds. After obtaining the said documents, you likewise discovered the fictitious deed of sale Mr. Herrera had executed in order to lessen the amount of taxes he should had paid. Consequently, you assumed the payment of the deficiency taxes on the subject transaction through Improved Voluntary Assessment Program (IVAP) by paying ____________________________ (P_________) and ____________________________ (P________) representing CGT and DST deficiency. In reply, please be informed that Section 205 (a) of the National Internal Revenue Code (Tax Code) of 1997, as amended provides for civil remedies for collection of taxes, viz. : " SEC. 205. Remedies for the Collection of Delinquent Taxes. The civil remedies for the collection of internal revenue taxes, fees, or charges, and any increment thereto resulting from delinquency shall be: (a) By distraint of goods, chattels, or effects, and other personal property of whatever character, including stocks and other securities, debts, credits, bank accounts, and interest in and rights to personal property, and by levy upon real property and interest in or rights to real property ; (Emphasis supplied) xxx xxx xxx" The Notice of Tax Lien, Notice of Levy and the Declaration of Forfeiture of Real Property are encumbrances in favor of the government securing the tax liability of the registered owner. However, the encumbrances are effective only to cases wherein the right of ownership in a particular property ILLEGIBLE PORTION with the delinquent taxpayer. The tax lien/levy cannot be made applicable to cases when a delinquent taxpayer had sold the property and parted with his ownership thereof. Moreover Section 3.1 (i) of Revenue Memorandum Order (RMO) No. 41-2019 dated June 4, 2019 provides that: "III. GENERAL PROVISIONS 3.1 The issued Warrant of Garnishment (WG) , Notice of Tax Lien (NTL), Notice of Tax Levy (NOL), and Notice of Encumbrance (NOE) may be extinguished under any of the following instances: xxx xxx xxx i. The seized property is no longer owned by the delinquent taxpayer due to disposal prior to its seizure/lien/issuance of NOE." xxx xxx xxx Since Mr. Herrera had sold the subject property to you prior to the inscription of the encumbrances, the annotations therefore in your title are void and without any legal effect. Accordingly, the Registry of Deeds is given authority to lift the said encumbrances in your favor. 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.) LILIA CATRIS GUILLERMO Commissioner of Internal Revenue