An Ordinance Amending Section 9 of Ordinance No. 57, Series of 2020

December 22, 2009 BIR RULING [DA-(I-041) 819-09] 57 (B); 196; DA-(C-106) 330-08; DA-377-08; DA-288-04; DA-178-2003; DA-223-02 Suico-Le Chanco Peque Caracut-Arnibal Law Offices Suite 2-C Capitol Centrum Escario-Clavano Sts., Cebu City Attention: Atty. Maria Earla Caracut-Arnibal Gentlemen : This refers to your letter dated December 17, 2009 requesting on behalf of your client, Ms. Jenepher Fernandez, that the assignment of rights over a property is exempt from capital gains tax and documentary stamp tax. Documents submitted show that Ms. Jenepher Fernandez is a prospective assignee of a house and lot at St. Alexandra Estates in Antipolo City developed by Avida Land Corporation (Avida), with the lot more particularly described as Lot No. 17, Block 11, Phase No. 1 containing an area of 254 square meters, more or less, and the house model being a Marsala Premiere Unit with a floor area of 160 square meters, more or less. The Assignor is one Gerlie Pano Crisostomo who is the acknowledged buyer of the above-described property, who purchased the same on installment from Avida per the Contract to Sell dated January 30, 2007. Per records of Avida, Ms. Crisostomo has already paid more than 25% of the purchase price, she has not paid the subject property in full and has in fact incurred interest and penalties for having failed to pay the monthly amortization for several months to date. Thus, the title and ownership is still retained by the developer-Avida. As such, Ms. Crisostomo has decided to assign her rights over the above-described property to said Ms. Jenepher Fernandez. Ms. Crisostomo, however was informed that capital gains tax and documentary stamp taxes based on the selling price must be paid before the assignment shall be given due course by AVIDA, to which you claimed otherwise. HacADE In reply, please be informed that under Section 24 (D) (1) of the Tax Code of 1997, as amended, a final tax of six percent (6%) based on the gross selling price or current fair market value determined in accordance with Section 6 (E) of the Tax Code of 1997, as amended, whichever is higher, is imposed upon capital gains presumed to have been realized from the sale, exchange or other disposition, of real property located in the Philippines, classified as capital assets, including pacto de retro sales and other forms of conditional sales, by individuals, including estate and trusts. The contemplated sale of rights over the property in favor of Jenepher Fernandez is not subject to the capital gains tax under Section 24 (D) (1) of the Tax Code of 1997, as amended. The said Section necessarily requires that there be a conveyance of title to a real property and not merely rights over real property. However, any income received in excess of the amount originally paid to the seller by Ms. Crisostomo shall be subject to the graduated income tax rates under Section 24 of the same Tax Code of 1997, as amended. Moreover, the Deed of Assignment of Rights to be executed for the purpose is not likewise subject to the documentary stamp tax prescribed under Section 196 of the Tax Code of 1997, as amended, considering that what is being conveyed or assigned is not the real property itself, but only the rights pertaining to such real property. However, the acknowledgment thereof is subject to the P15.00 documentary stamp tax imposed under Section 188 of the Tax Code of 1997, as amended. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation it will be ascertained that the facts are different, then this ruling shall be considered as null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service