BIR Ruling No. 281-2021

REPUBLICOF THE PHILIPPINES

DEPARIMENT OF FINANCE BUREAU OF INTERNAL REVENUE Quez8n C

Sections 24 (D) (1) and 196 of the National Internat Revenue Code of BIR Ruiing No.456-17; and 1997, as amended:

BIR Ruling No. 372-16.

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Date: AUt n? 02t

AMBROSIO & PARTNERS LAW OFFICE 1318-E Reza Bldg., Quezon Ave., South Triangle 1 13 Quezon City, Metro Manila, Philippines

Attention: ATTY. BENITO F. AMBROSIO Counsel for Alfredo B. Garcia and Norma G. Garcia

Sir:

This refers to your tetter dated August 29. 2019. filed in behalf of Mr. Alfredo B. Garcia and Mrs. Norma Garcia-Acosta, requesting for confirmation of your opinion that the transfer of properties by and between the abovenamed parties, since it is one without consideration or Nationa! Internal Revenue Code ("Tax Code") of 1997. as amended, and to Documentary Stamp Tax (DST) imposed under Section 1 96 of the same Tax Code. cause, is not subject to Capital Gains Tax (CGT) imposed under Section 24 (D) (1) of the

area of three hundred three square meters. registered co-owners of a parcel of land. particularly a residential lot with improvements thereon, covered by Transfer Certificate of Title (TCT) No. It is represented that Mr. Alfredo B. Garcia and Mrs. Norma Garcia-Acosta are the containing an

hundred fifty one square meters and fifty decimeters (15?.50) each. Consequently, TC'T Nos. and Mrs. Garcia-Acosta executed a Deed of Exchange on May 8. 2019 in order to rectify the error. On May 22, 2019, Mr. Garcia and Mrs. Garcia-Acosta also executed a Joint Affidavit stating. among others. the error and inadvertence that had occurred in the execution of the Partition .Agreement and that they both agree to exchange the subject lots with each other. and Mrs. Garcia-Acosta. Unfortunately. upon noticing that the titles issued to them were inadvertently interchanged. as caused by the mistake in the Partition Agreement. Mr. Garcia Agreement, wherein they divided equally the property into two lots having an area of one It is further represented that on July 19. 2018. the above co-owners executed a Purtition and covering the subdivided lots were issued to Mr. Garcia

and imposed. In support ot your request. you submitted/attached the following documents: there can be no basis for which capital gains tax and documentary stamp tax may be assessed of properties has no consideration involved. and the parties did not gain from such exchange. You now request for the confirmation of your opinion that since the "swap" or exchange

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1 Partition Agreement dated July 19, 2018 Photocopy of Transfer Certificate of Title (TCT) No. Tax Declaration of Real Property No.

4 Plan of Subdivision Survey and Technical Descrintion 5 Transfer Certificate of Title (TCT) No. 6. 1 8 Joint Affidavit dated May 22, 2019 Transfer Certificate of Title (TCT) No. Deed of Exchange dated May 8, 2019

In reply, please be informed that Section 24 (D) (1) of the Tax Code, as amended. provides:

"(D) Capital Gains from Sale of Real Property.

of six percent (6%) based on the gross selling price or current fair market value as (} In General. - The provisions of Section 39(B) notwithstanding, a final tax

determined in accordance with Section 6(E) of this Code, whichever is higher, is hereby imposed upon capital gains presumed to have been reaiized 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 estates and trusts: Provided, That the tax liability, if any. on gains from sales or other dispositions of real property to the government or any of its political subdivisions or agencies or to government-owned or controlled corporations shall be determined either under Section 24 (A) or under this Subsection, at the option of the taxpayer."

In the case of Salud vs. Commissioner of Internal Revenue.' the Court of Tax Appeals had the occasion to rule that the Tax Code, as amended, does not define nor qualify the phrase "other disposition." It is clear, plain and therefore must be applied without attempted or strained interpretation. It shall be construed in its plain and simple meaning. "Disposition" means an act of disposing; transferring to the care or possession of another; the parting with, alienation of. or giving up property.2

disposition" includes within its purview all kinds of dispositions of real property under Section Appiying the above ruling of the Court. it is therefore clear that the phrase "other

24 (D) (1) of the Tax Code, as amended, uniess specifically excluded therefrom or subject to another tax treatment pursuant to different provisions of the Tax Code, as amended. Thus, the Deed of Exchange executed by the NPC in favor of Mr. Alfredo B. Garcia and Mrs. Norma Garcia-Acosta, in the absence of a specific law excluding it from the coverage of Section 24 (D) (1) of the Tax Code, as amended, is deemed included within the purview of the said provision. Therefore. it shall be subject to the capital gains tax imposed therein.

Also, the reconveyance being a disposition of real property under Section 24 (D) (1) of

Section 188 and Section 196 of the Tax Code, as amended. the Tax Code. as amended, is likewise subject to the documentary stamp taxes imposed under

As repeatedly held by the Supreme Court, "laws granting exemption from tax are

Taxation is the rule and exemption is the exception. The law does not took with favor on tax construed strictissimi juris against the taxpayer and liberally in favor of the taxing power.

2 Black's Law Dictionary, 6th Edition. 1 CTA EB Case No. 412 dated April 30, 2009.

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exemptions and that he who woutd seek to be thus privileged must justify it by words too plain

to be imistaken and too categorical to be misinterpreted."

Please be guided accordingly.

Very truly yours.

8sa1y

Commissioner of Internal Revenue CAESAR R. DULAY 044307 O I W

K-I RPT K-1-FR-19-1526

3 Sea-Land Service, Inc. vs. Court of Appeals and Commissioner of Internal Revenue, G.R. No. 122605, April 30, 2001

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