BIR Ruling No. 005-2024

REPUBLIC OF THE PHILIPPINES

BUREAU OF INTERNAL REVENUE DEPARTMENT OF FINANCE National Office Building Quezon City

Section 66 of R.A. No. 6657; BIR Ruling No. 009-16 Section 36 of R.A. No. 3844;

CT: 005-2024

JAN 1 8 2024

YOLANDA T. ARISTO Plaridel Bypass Road, Baliuag, Bulacan FRANCISCO BALTAZAR, JR. ELEUTERIO C. BALTAZAR EVELYN T. MENDOZA ANGEL S. CRUZ RUFINO M. TOMAS EMELITA VALENCIA NAZARIO

Gentlemen:

Aristo, Rufino M. Tomas, Alicia Baltazar Manalaysay, and Angel S. Cruz (the square meters covered by Transfer Certificate of Title (TCT) No. conveyed as disturbance compensation under Republic Act (R.A.) No. 3844', as dated September 18, 2017 executed by Emelita Valencia Nazario in favor of Francisco Baltazar, Jr., Eleuterio C. Baltazar, Marcelito T. Igna, Evelyn T. Mendoza, Yolanda T. amended by R.A. No. 63892 capital`gains tax (CGT) and documentary stamp tax (DST) on the Deeds of Assignment "assignees"), over a portion of land, particularly an area of This refers to your consolidated requests for exemption from the payment of and 1

Law of 1988" which provides, viz.: Compensation is exempt from capital gains tax and documentary stamp tax pursuant to Section 66 of R.A. No. '6657 otherwise known as the "Comprehensive Agrarian Reform In reply, please be informed that transfer of real property by way of Disturbance

from capital gains. These transactions shall also be exempted from the payment of registration fees, and all other taxes and fees for the conveyance or transfer thereof. Provided, that all arrearages in real prbperty taxes, without penalty or interest, shall be deductible from the compensation to which the owner may be entitled. " "Sec. 66. Exemption from Taxes and Fees of Land Transfers. Transactions under this Act involving a transfer of ownership, whether from natural or juridical persons, shall be exempted from taxes arising

No. 6389, allows disturbance compensation to the tenant as a result of extinguishment of tenancy relationship by reason of the reclassification or conversion of the agricultural land into non-agricultural land, to wit: Mbreover, Section 36 (1) of R.A. No. 3844, as amended by Section 7 of R.A

2 Republic Act No. 6389 entitled "An Act Amending Republic Act Numbered Thirty-Eight Hundred and Forty-Four, As Amended, Otherwise Known as The Agricultural Land Reform Code, And for Other 1 Republic Act No. 3844 entitied "An Act to Ordain the Agricultural Land Reform Code and to Institute Land Reforms in The Philippines, Including The Abolition of Tenancy and The Channeling of Capital into Industry, Provide for The Necessary Implementing Agencies, Appropriate Funds Therefor and for Purposes." Other Purpdses."

OT- 005-2024

Notwithstanding any agreement as to the period or future surrender, of the land, an agricultural lessee shall continue in the enjoyment and possession of his landholding, except when his dispossession has been authorized by the Court in a judgment that is final and executory if after due hearing it is shown that: "Sec.36.Possessionof Landholding: Exceptions. JAN 1 8 2024

the agricultural lessee shall be entitled to disturbance gross harvests on his landholding during the last five preceding calendar years;" (1) The landholding is declared by the department head upon recommendation of the National Planning Commission to be suited for residential. commercial. industrial or some other urban purposes: Provided. That compensation eauivalent to five times the average of the

Hence, disturbance compensation given to a tenant pursuant to Section 36 of contemplated under Section 66 of R.A. No. 6657. R.A. No. 3844, as amended by R.A. No. 6389, is still considered one of the transactions Only Section 35 of R.A. No. 3844 was expressly repealed by R.A. No. 6657.

of the subject parcel of land in favor of the assignees is subject to capital gains tax and compensation received by the assignees was a result of the extinguishment of tenancy relationship because of the reclassification or conversion of the agricultural land into residential, commercial, industrial or some other urban purposes, pursuant to Section 36 of R.A. No. 3844, as amended by R.A. No. 6389. Such being the case, the transfer documentary stamp tax. However, documents submitted failed to prove that the disturbance

Please be guided accordingly.

ROM LUMAGUI.JR Commissioner of Internal Revenue

K1-FR-21-0629 K1-RPT