Issuance of Certificate Authorizing Transfer of Title to Real Property and Verification of the Tax Return Under the Schedular Capital Gains Tax Law

May 28, 1980 REVENUE MEMORANDUM ORDER NO. 21-80 SUBJECT : Issuance of Certificate Authorizing Transfer of Title to Real Property and Verification of the Tax Return Under the Schedular Capital Gains Tax Law TO : All Revenue Service Chiefs, Revenue Regional Directors, Chiefs of Branches, Revenue District Officers and Others Concerned I. Policy Pursuant to Section 34(h) of the National Internal Revenue Code, as amended by Batas Pambansa Blg. 37, capital gain realized from the sale or other disposition of real property by a citizen of the Philippines or resident alien is subject to final schedular capital gains tax. It is the policy of this Bureau to expedite the processing of applications and issuance of certifications required by the law. acd II. Certification Requirement Registration of any document transferring real property shall be effected by the Register of Deeds only upon certification by the Commissioner or his duly authorized representative that such transfer has been reported and the tax thereon imposed, if any, has been paid. A. Revenue Officers Authorized to Issue Certification The Revenue Regional Director or the Revenue District Officer (hereinafter referred to as the "authorized revenue officer") under whose administrative jurisdiction the taxpayer falls, is hereby authorized to issue the certification, the forms for which are prescribed in Annex "A-1" or Annex "A-2" hereof, to be presented to the Register of Deeds. This authority shall not be delegated to any other revenue officer or employee. B. Scope of Certification Except in the cases hereinafter provided, a certification shall be issued in any of the following instances: 1. The capital gains tax as declared in the return is fully paid; 2. Portions of the capital gains tax due or payable up to the time of certification are actually paid in case of qualified installment sales; 3. The capital gain is exempt under Section 35 of the National Internal Revenue Code or under special law; 4. The gain realized is not subject to capital gains tax because (a) the real property sold was used in the seller's trade or business; cd (b) the real property was held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business (e.g., the seller is engaged in the business of buying and selling real property); (c) the real property was offered for rent. 5. The seller elects to report the capital gain under Section 21, in relation to paragraphs (a), (b), (c) and (d) of Section 34 of the Tax Code, where the property was sold to the government or any of its political subdivisions or agencies or to a government-owned or controlled corporation; or 6. The capital asset transaction resulted in a loss. C. Procedure For Issuance of Certification 1. If the selling price shown in the capital gains tax return is lower than the fair market value of the real property appearing in the latest real property tax declaration, certification will be issued only if the taxpayer pays capital gains tax computed on a basis where the selling price will not be considered as lower than such fair market value. 2. When the vendor claims deductions for cost of property, improvement and expenses of sale, the certification shall be issued immediately after he substantiates his deductions. In any case, certification shall be issued not later than ten (10) days from the date the return was filed, after which it shall immediately be assigned for field verification. cd i 3. If the capital gain is taxable, the seller must be required to present the Revenue Tax Receipt (together with the Confirmation Receipt) or the Revenue Official Receipt, evidencing payment of the capital gains tax. 4. If the taxpayer claims that the capital gain is exempt from the tax under existing general or special law, a sworn declaration must be attached to his application. 5. If the seller is qualified to report the capital gain on the installment basis, the authorized revenue officer shall require the presentation of Revenue Tax Receipt (RTR) (together with the Confirmation Receipt), or the Revenue Official Receipt, evidencing payment of the capital gains taxes corresponding to the installment payments already received as at the time of application. 6. If the real property is sold on a deferred payment plan which does not qualify as installment sale under Section 43(b) of the Tax Code (whether or not title was retained by the vendor or transferred to the vendee), the certification shall be issued only upon proof that the capital gains tax on the entire capital gain has been paid. D. Disposition of Copies of the Certification The authorized revenue officer shall prepare four (4) copies of the required certification to be issued and distributed as follows: Original - to the taxpayer for presentation to the Register of Deeds. Duplicate - to be retained by the authorized revenue officer. Triplicate - to be forwarded to the Direct Taxes Division, National Office, 7 Diliman,Quezon City Quadruplicate - to the Administrative Branch of the corresponding Revenue Regional Office III. Capital Gains Tax Return, Time and Place of Filing Persons subject to the final schedular capital gains tax shall, within thirty (30) days following the sale or disposition of capital assets, file in quadruplicate, the capital gains tax return (BIR Form No. 1701-E) with the Revenue District Officer, Collection Agent or duly authorized Treasurer of the municipality in which such person has his legal residence or principal place of business in the Philippines, or if there be no legal residence or place of business in the Philippines, then with the Office of the Commissioner of Internal Revenue. Distribution of the copies of the capital gains tax return are as follows: Original - to be attached to the examiner's report. Duplicate - to the Data Processing Center. Triplicate - to be retained by the taxpayer. Quadruplicate - file copy of the receiving office. IV. Verification and Assessment of Deficiency Tax A. Field Verification . In case the return is to be assigned for field verification, regular letter of authority (BIR Form No. 1965) shall be issued to a revenue examiner. B. Office Verification . The regular letter of authority is not necessary where the correct selling price has been established and deductions for cost of property, improvement and expenses of sale duly substantiated. The verification herein contemplated shall be conducted only by revenue examiners officially designated in writing by the Regional Director or Revenue District Officer, as the case may be. C. Letter of Confirmation 1. Field verification . After verification, the Revenue District Officer shall issue the regular letter of confirmation (BIR Form No. 1965-E). 2. Office verification . After verification, the Revenue District Officer shall issue a certificate of verification (Annex "B"). acd D. Standard and procedure of reporting 1. In all instances where the capital gains tax return has been processed and verified in accordance with the guidelines prescribed in the preceding paragraphs, the revenue examiner concerned shall submit a memorandum report containing the following: (a) Official original copy of the capital gains tax return; (b) Official duplicate copy of the letter of confirmation or certificate of verification; (c) Authentic copy of the revenue tax receipt (together with the confirmation receipt) or revenue official receipt, evidencing payment of the correct capital gains tax; (d) Authentic copy of the deed of sale, transfer or exchange of the real property; (e) Authentic copy of the deed or similar document evidencing the taxpayer's acquisition cost of the real property sold, disposed or exchanged; (f) Authentic copy of the real property's latest tax declaration; (g) Analysis and justification of the allowed cost of property, improvements and expenses of sale. 2. The revenue examiner's report of tax verification shall be submitted to the Revenue District Officer. (a) Field verification the report covered by a regular letter of authority shall be submitted within thirty (30) days from receipt thereof. (b) Office verification the report for which no regular letter of authority has been issued shall be submitted within seven (7) days from the date the case has been officially assigned. E. Presumption of correctness of declarations 1. In the absence of evidence to the contrary, the selling price of the property shown in the return shall be presumed correct if it is not less than the fair market value shown in the latest tax declaration. cd 2. Where the property sold was previously mortgaged, the mortgage value may also be taken into account in determining the true selling price. 3. Unless the invoices and receipts are presented, the cost of the building or improvement shown in the building permit or construction contract may be considered to prove cost. F. Documentary stamp tax In case the selling price in the deed of sale is adjusted, the corresponding deficiency documentary stamp tax shall be collected in accordance with Section 245 of the Tax Code. G. Approval of Examiner's report The revenue examiner's report of verification shall be approved by the Regional Director, except when the selling price of the real property amounts to P500,000.00 or more, in which case, the report shall be forwarded to the Assessment Service for review and approval by the Assistant Commissioners. H. Tax Collection report All Revenue Directors shall consolidate monthly reports of capital gains tax collections (Annex "C-1" or "C-2") which shall be transmitted to the Revenue Collection Service not later than the tenth day of the following month. V. Repealing Clause All revenue memorandum orders and other pertinent issuances inconsistent herewith are hereby revoked or amended accordingly. VI. Effectivity . This Revenue Memorandum Order shall take effect immediately and shall govern the determination of the net capital gain under Batas Pambansa No. 37. All concerned enjoined to comply with the provisions hereof. RUBEN B. ANCHETA Acting Commissioner ATTACHMENT ______________________ Date C E R T I F I C A T I O N This is to certify that ______________________________, a resident of _________________________________________________ who sold real property covered by OCT/TCT/Tax Declaration No. ________________ located at ____________________________________________________ has paid the amount of _________________________________________ ____________________________________________under Revenue Tax Receipt No. _____________ and Confirmation Receipt No. ___________ representing the final tax on capital gains derived from such sale as declared in his/her capital gains tax return. Pending investigation of such return, the transfer of the above described real property in the name _________________________________________________ may be registered by the Register of Deeds. This certification is issued pursuant to and shall be used only for purpose of complying with the requirements of Section 34(h) of the National Internal Revenue Code and does not preclude the Bureau of Internal Revenue form assessing and collecting whatever deficiency capital gains tax that may be found due from the seller after investigation of his/her capital gains tax return. EFREN I. PLANA Acting Commissioner of Internal Revenue BY: DIONISIO M. HERRERA Revenue District Officer TAN-H6638-K2728-A-1 RD-30 Certification fee of P1.50 paid under OR # ___________________________ dated _______________________ and documentary stamps of P1.50 affixed to the original hereof. NOTE: THIS CERTIFICATION BECOMES VOID IF IT CONTAINS ERASURES. _____________________ C E R T I F I C A T I O N This is to certify that ____________________________________, a resident of ________________________________________________ who sold real property covered by TCT No. __________________ located at ________________________________________________________ is not required to pay the final capital gains tax because according to the sworn declaration of _______________________ dated_______________ the herein described real property is ordinary asset considering that ______________________ is engaged in the sale of subdivision lots. Accordingly, the transfer of the above described real property in the name of ______________________ may be registered by the Register of Deeds. This certification is issued pursuant to and shall be used only for purposes of complying with the requirements of Section 34(h) of the National Internal Revenue Code and does not preclude the Bureau of Internal Revenue from assessing and collecting whatever deficiency tax that may be found due from the seller after investigation. EFREN I. PLANA Acting Commissioner of Internal Revenue BY: DIONISIO M. HERRERA Revenue District Officer TAN-H6638-K2728-A-1 RD-30 Certification fee of P1.50 paid under OR # ________________ dated ____________________________ and documentary stamps of P1.50 affixed to the original hereof. NOTE: THIS CERTIFICATION BECOMES VOID IF IT CONTAINS ERASURES. CERTIFICATE OF VERIFICATION __________________ Date Sir/Madam: With reference to the verification of the capital gains tax return involving the sale of real property/ies covered by TCT/TD _____________ made by you on __________________, 19_______, please be informed that the corresponding report of Revenue Examiner ___________________ of Revenue District Office No. _________, ________________________, has been submitted to this Office for approval. Very truly yours, _____________________ Revenue District Officer