BIR Ruling [UN-132-95]

March 31, 1995 BIR RULING [UN-132-95] Law Offices Benito P. Fabie 1535 Leon Guinto Sr. Street Ermita, Manila Attention: Atty . Erlinda V . Fabie Gentlemen : This refers to your letter dated January 27, 1995 stating that your client, Imelda Santiago Bulatao, was the vendee of a parcel of land with improvements located at San Diego, Sampaloc, Manila; that the document was executed by Anacleto and Beatriz F. Santiago (her maternal grandparents) on August 5, 1974; that in good faith and without malice, she was not able to cause the transfer of the title in her name as she left for the United States immediately thereafter; that upon the death of her grandmother Beatriz on November 1, 1991, or almost 20 years after the death of her maternal grandfather Anacleto, she instructed your office to effect the transfer of title in her name; that sometime in 1993 you inquired from the Bureau of Internal Revenue in Port Area about the amount of tax due and payable to effect the transfer; that after computation, you were told that the tax due is P4,240.60; that you were not able to make the necessary payment as the vendee Imelda could not locate the certificate of title; that on January 13, 1994, you filed a petition with the Regional Trial Court of Manila for the issuance of a new owner's duplicate copy of Transfer Certificate of Title No. 77239 of the Registry of Deeds of Manila, attaching thereto photo copy of the title and affidavit of loss of title and original copy of the Deed of Sale dated August 5, 1974 in favor of Imelda Santiago Bulatao, among other; that on June 6, 1994, the Regional Trial Court of Manila Branch IV(04) issued the Order directing the Registry of Deeds of Manila to issue a new owner's duplicate of Transfer Certificate of Title No. 77239 and to deliver the same to the petitioner as owner by virtue of the Deed of Sale dated August 5, 1974; that on January 24, 1993, you presented the new owner's duplicate copy of the Title to the Bureau of Internal Revenue in Port Area for the payment of the tax previously computed by the same office; that the examiner made a new computation and arrived at the amount of P49,244.00 as the tax due and payable; that the basis of the computation was the market value of the property as appearing in the Tax Declaration of 1979; that record of tax declaration for 1974 is no longer kept in the files of the City Assessor's Office in Manila; that the new computation is tantamount to imposing the final schedular tax on capital gains which become effective only on September 7, 1979 and cannot be applied to a sale dated August 5, 1974; that the consideration on said sale transaction was more or less the assessed value of the property in 1974 (Tax Declaration for 1979 shows the assessed value prior thereto); and that you are of the opinion that the consideration of the sale as expressed in the contract should be the basis for the computation of the tax due and payable. Based on the foregoing representations and documents submitted, you now request for a ruling allowing you to pay the amount of P4,240.60 as previously computed instead of the computation arrived at in the amount of P48,244.00. In reply, please be informed that all sales, exchanges, or transfers of real properties (whether classified as ordinary or capital asset) by corporations, consummated on or after January 1, 1990, are subject to the creditable withholding tax. However, in the case of individuals estates, trusts, trust funds or pension funds, only sales, exchanges or transfer of real properties classified as ordinary assets, consummated on or after January 1, 1990, are subject to the creditable withholding tax. Sale by individuals of real properties classified as capital assets remain subject to the 5% capital gains (final) tax. (RMC 7-90 dated January 16, 1990) As provided for in RMC No. 80-89, the date of notarization appearing on the Deed of Sale shall be considered prima facie the date of consummation of the contract of sale. However, in the case of sales evidenced by public instruments notarized on or before November 30, 1989, the same shall be deemed consummated on the date the Deed of Sale/Transfer is filed with or submitted to the proper revenue office, except in exceptional circumstances where the taxpayer can prove by documentary evidence other than the Deed of Sale/Transfer that the public instruments was truly executed and notarized on the date shown therein. (Ibid) It is the opinion of this Office that the Deed of Absolute Sale executed by Spouses Anacleto G. Santiago and Beatriz F. Santiago in favor of your client, Imelda Santiago Bulatao is an ancient document (more than 24 years old), hence, its authenticity is presumed. It qualifies as an exception to the rule that the date of presentation of the document with the BIR is the date of notarization. Accordingly, it is subject to income tax on the gains derived from such sale using the income tax rate enforced as of August 5, 1974 or to the amount of P4,240.60 as previously computed by this Office and not to the schedular tax on capital gains which become effective on September 7, 1979. (BIR Ruling No. 065-94 dated March 1, 1994) cdt Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service) By: ALICIA L. TOMACRUZ Head Rev. Executive Asst. (Legal)