BIR Ruling No. 569-2017

REPUBLIC OF THE PHILIPPINES

DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE

PHILIPPS

Quezon City

Tax (ode "of 1997. as anended. Scctions BIR Ruling No. 444-13 24(D)(1);& 196

t69-2017 12-7-017

Sta. Barbara. Iloiio RURAL BANK OF STA. BARBARA (ILOILO), INC.

Attention: Harry M.Taningco Chairman of the Board

Gentiemen:

whether or not the transfer of Free Patent No. subject to the capital gains tax (CGT) and documentary stamp tax (DST). (OCT) No. This refers to your letter dated March 16, 2015 requesting clarification on to thc namc of the Rural Bank of Sta. Barbara (Iloilo). Inc. is Original Certificate of Title

The facts. as culled from the records and as represented. are as follows:

1. Dominador Jover. Jr., as Attorney-in-Fact of Elisea M. Vda. De Jover, executed in favor of the Rural Bank of Sta. Barbara (Iloilo), Inc.. a real estate mortgage over an untitled parcel of iand covered by Tax Declaration No. Lumbia, Estancia, iloilo. with an area of 214.217 square mcters, morc or less. situated in Bo.

2. For failure by the mortgagor to pay the mortgage debt. the above property Sta. Barbara (lloilo), Inc. in satisfaction of the mortgage amount of was foreclosed and sold at a public auction in favor of the Rural Bank of for a total amount of was registered with the Registry of Deeds for Iloilo City on November 25. 1999 under Entry No. plus interests, penalties. attorney's fecs and other charges. or The Certificate of Sale at Public Auction

3. For failure by the mortgagor to redeem the property, a Final Deed of Sale was issued by the Office of the Provincial Sheriff of lloilo City in favor of the Rural Bank of Sta. Barbara (Iloilo), Inc. on November 28, 2000.

#569-2017 Rural Bank of Sta. Barbara (Iloilo), Inc. Fage 2 of 3 12-7-2017

4. The Affidavit of Consolidation of Ownership was registered with the Registry of Deeds on December 1, 2000.

5.It was discovered in September 2014 that a Free Patent No.587379/OCT No.F-22583 issued on April 26,1979 covering the same property had actually been issued to Dominador M. Jover,Jr.

at the public auction and is now the owner of the property when the mortgagor failed to redeem the same. Patent No. The Rural Bank of Sta. Barbara lloilo), Inc.now seeks to transfer the Free /OCT No. to its name,being the purchaser of said property

2012 dated May 31,2012 provides for the taxability of foreclosed/auctioned off properties in case of failure by the owner/mortgagor to redeem the same, to wit: In replyplease be informed that Section 2 of Revenue Regulations RR No.9

his Foreclosed/Auctioned Off Property within the Applicable Statutory Redemption Period- "Section 2. Taxability of Owner's/Mortgagor's Failure to Redeem

property is an ordinary asset; the value added tax (VAT) imposed the documentary stamp tax (DST) imposed under Section 196 of the Tax Code shall become due. sales, regardless of the type of proceedings and personality of mortgagees/selling persons or entities, the capital gains tax (CGT) imposed under Section 24(D1 and 27(D(5 of the Tax Code in relation to Section 57 of the Tax Code and RR 2-98,as amended,if the property is a capital asset; or the Creditable Withholding Tax under Section 106 of the Tax Code and RR 16-05,as amended; and (CWT) imposed under Section 57 and RR2-98.as amended,if the In case of non-redemption of properties sold during involuntary

from expiration of the applicable statutory redemption period; or file the CWT return and remit the said tax to the Bureau within ten (10) days following the end of the month after expiration of the applicable statutory redemption period. withheld the CGT or CWT due from the sale,shall then file the CGT return and remit the said tax to the Bureau within thirty (30) days The buyer of the subject property, who is deemed to have

month following the month when the right of redemption prescribes. circumstances which warrant the imposition of VAT, the said tax must be paid to the Bureau by the VAT-registered owner/mortgagor on or before the 20th or 25th day, whichever is applicable, of the If the property sold through involuntary sale is under the

Rural Eank of Sta. Barbara (Iloilo), Inc. fage 3 of 3 #569m2017 12-?-2017

applicable statutory redemption period. within five (5) days afier the close of the month after the lapse of the The DST return shall be filed and the said tax paid to the Bureau

with Section 6(E) of the Tax Code. fair market value or the zonal value as determined in uccordance higher of the consideration (hid price of the highest bidder) or the The CGT/CWT/VAT & DST shall be hased on whichever is

of Sta. Barbara (lloilo), Inc. during the foreclosure sale. for failure by the mortgagor to redeem, is subiect to CGT/CWT/VAT, as the case may be, and DST. Pursuant to RR file the appropriate returns and remit the tax to the BIR. Thus. the appropriate taxes due Bank of Sta. Barbara (lloilo), Inc. in accordance with the provisions of RR No. 09. No. 9-2012, the buyer. Rural Bank of Sta. Barbara (lloilo), Inc., of the foreciosed property, who is deemed to have withheld the CGT or CWT due from the sale, shall on the said property should have been withheld and remitted to the BIR by the Rural 2012. (BIR Ruling No. 443-13 dated November 27, 2013) Applying the foregoing, the subject property which was sold to the Rurai Bank

transfer of said Free Patent/OCT to the name of the Rural Bank of Sta. Barbara (lloilo). purchaser, Rural Bank of Sta. Barbara (iloilo), Inc., transfer the title of said property to its name. However, if the taxes due thereon had already been paid to the BIR prior to the discovery of the Free Patent No. lnc. shall no longer be subject to the CGT and DST Only upon payment of the appropriate taxes due on the property can the JIOCT No. , then the subsequent

However, if upon investigation, it will be disclosed that the facts are different, then this This ruling is being issued on the basis of the foregoing facts as represented.

ruling shall be considered nult and void

Very truly yours. A

K - I Commissioner of Internal Revenue CAESAR R. DULAY 011672