Bureau of Local Government Finance Opinion

August 27, 1996 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 1st Indorsement Respectfully referred to the City Treasurer, Quezon City, requesting comment and/or appropriate action. This refers to the basic letter, dated July 25, 1996, of Mr. Carlos J. Reyes of Anzal Realty Corporation requesting opinion on the correct interpretation of Section 135 of RA 7160, otherwise known as the Local Government Code of 1991 (LGC) in relation with Section 25 of the 1993 Quezon City Revenue Code (QCRC) and another related issue raised therein. Said request is being made in view of the observation that Section 25 of the QCRC has added, as a basis for the imposition of the local tax on the sale or transfer of title to property, the "Zonal Value" prescribed by BIR, which phrase is not existing in Section 135 of the LGC, quoted hereunder: "SEC. 135. Tax on Transfer of Real Property Ownership . (a) The province may impose a tax on the sale, donation, barter, or on any other mode of transferring ownership or title of real property at the rate of not more than fifty percent (50%) of one percent (1%) of the total consideration involved in the acquisition of the property or the fair market value in case the monetary consideration involved in the transfer is not substantial, whichever is higher . The sale, transfer or other disposition of real property pursuant to RA 6657 shall be exempt from this tax. "xxx xxx xxx It shall be the duty of the seller, donor, transferor, executor or administrator to pay the tax herein imposed within sixty (60) days from the date of execution of the deed or from the date of the decedent's death." (Emphasis supplied.) prcd On the other hand, Sec. 25 of the Quezon City Revenue Code reads: "SEC. 25. Imposition of Tax . There is hereby imposed a tax at the rate of sixty percent (60%) of one percent (1%) for 1993-1994 and seventy five percent (75%) of one percent (1%) for 1995 and the succeeding years thereafter on the sale, donation, barter, or any mode of transferring ownership of title of real property within the territorial jurisdiction of Quezon City based on the total consideration involved in the sale of the property or of the fair market value and/or zonal value of the property in case the monetary consideration involved in the transfer is not substantial, whichever is higher." (Emphasis supplied.) It is clear from the aforequoted provisions of the LGC that the tax base should only be either the total consideration involved in the acquisition of the property, or its fair market value, presumably that which is determined by the local assessor as approved by the local Sanggunian. The said provision of law (the Code) is express and explicit and, therefore, the insertion of the phrase "or the zonal value" partakes the nature of an amendment to the law and, thus, beyond the authority of the Sangguniang Panlungsod of Quezon City which enacted the Quezon City Revenue Code. Hence, that Office may not compute the tax on transfer of properties on the basis of the zonal valuations prescribed by BIR for lack of any legal ground therefor. The second issue pertains to the applicability of the "60-day period" on the payment of said transfer tax under the following situation: 1. The transfer document was executed on July 8, 1994. 2. Revenue Ruling No. S-34-275-96 on the tax free transfer was issued by the BIR on July 3, 1996. 3. The Certificate Authorizing Registration (CAR) which is required by the Register of Deeds to effect the transfer of real properties was issued by the BIR only on July 9, 1996. The CAR will not be issued by the BIR unless a ruling on the tax free character of the transfer is first secured. In the situation laid-out above, it is contended that there was no basis to pay the transfer tax until the BIR ruling came out and that the transfer will not be registered by the Register of Deeds in the absence of the CAR. However, this Bureau holds a contrary view. It is clear from the aforequoted Sec. 135 of the Code that the 60-day period shall commence from "the date of execution" of the deed of sale, donation or barter which in this case, appears to be July 8, 1994. The issuance by the BIR of the Certificate Authorizing Registration (CAR) pertains to compliance by those concerned with BIR regulations, particularly as to the full payment of internal revenue taxes and other national fees or charges. The CAR is a requirement for the registration of the property with the Register of Deeds and for the purpose of the issuance of a new transfer certificate of title in favor of the new owner, and to make the contract binding. None of these procedures has any bearing on the provision of the Code prescribing the sixty-day period of payment of the tax on transfers of real properties imposable by local government units. Besides, there is no other provision in the Code or other existing law that states that said transfer tax shall accrue on the date of registration of the corresponding deed of conveyance. This Bureau therefore also holds the view that any fine or penalty imposed in the QCRC on unpaid taxes due the city government shall apply in this case. Be guided accordingly. prcd (SGD.) LORINDA M. CARLOS Executive Director