Bureau of Local Government Finance Opinion

October 27, 2004 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION The Honorable Commissioner Bureau of Internal Revenue Quezon City S i r : This refers to your letter dated June 15, 2004, requesting this Bureau to issue a directive to Dir. Orlando L. Mina, OIC-Regional Director, BLGF Regional Office, Region I, San Fernando City, La Union, concerning his letters both dated April 29, 2004, addressed to the OIC-Provincial Assessor of Ilocos Sur for dissemination to all Municipal Assessors within his jurisdiction, and to the City Assessor of Urdaneta City, re: payment of Capital Gains Tax as contained under the Supreme Court (SC) Decision entitled Chua vs. Court of Appeals , G.R. No. 119255. In this connection, enclosed is a copy of our letter of same date, addressed to Mr. Peter D. Baluyan, current OIC-Regional Director of Region I, which reads in part, as follows: "A careful reading of the abovementioned SC Decision reveals that it pertains to the case involving the sale of real estate wherein the Court, among others, held that: "Payment of the capital gains tax, however, is not a pre-requisite to the transfer of ownership to the buyer ," which this Bureau believes has no bearing on the validity of the Deed of Sale effected by both parties. However, in reading the full text of the said SC Decision, it can be deduced that the Court likewise ruled that, in the transfer of title , the payment of capital gains tax is a pre-requisite in the issuance of new title. "xxx xxx xxx. "In view hereof, and although this Office recognizes the good intentions of Mr. Mina, of facilitating the immediate collection of local taxes, i.e., real property taxes, as expressed under your letter dated June 23, 2004 addressed to Atty. Jose Mario C. Buag, Deputy Commissioner, Legal and Inspection Group, BIR, we believe that the issuance of tax declarations on the basis of deeds of conveyance not registered with the Registry of Deeds and without prior payment of the capital gains tax is BEREFT OF ANY LEGAL BASIS. "We would like to remind that internal revenues which include the capital gains tax being collected by the BIR are the very sources of the Internal Revenue Allotment (IRA) to which a great majority of the LGUs rely heavily. A considerable decline in the collection efficiency of the BIR will surely affect the IRA allocation of LGUs. "In view of the foregoing, you are hereby ADVISED TO RECALL the abovementioned letters dated April 29, 2004 and other similar issuances in this regard of the then OIC-Regional Director; and TO ORDER the Provincial Assessor of La Union, San Fernando City TO DESIST from implementing the subject Memorandum dated May 27, 2004." We regret such misinterpretation of the abovementioned SC Decision. IcESDA Cordial regards. Very truly yours, (SGD.) MA. PRESENTACION R. MONTESA Executive Director