BIR Ruling No. 362-2017

REPUBLICOF THE PHILIPPINES

DEPARTMENT OF FINANCE BUREAU OFINTERNAL REVENUE Quezon City

Section 66.RA No.6657 BIR Ruling No. 009-16

#362-2017 FRANDO LAW OFFICE Calauan, Laguna -2017

Attention:ATTY.EUSTACIA V.FRANDO

Madam:

the payment of capital gains tax (CGT) and documentary stamp tax (DST) on the Deed This refers to your letter dated September 30. 2015 requesting exemption from

of Absolute Sale executed by Amelia Villamater in favor of the Heirs of Margarita Fabro. namely, Leonardo Fabro,Teodoro Fabro.Milo Fabro, Marieta Fabro, Nolasco Fabro.Moises Fabro.and Allan Fabro,over a portion of land,particularly an area of Transfer Certificate of Title (TCT) No. compensation under Republic Act (RA) 344, as amended by RA 6389. Three Thousand Three Hundred Ninety Seven (3.397) square meters covered by conveyed as disturbance

Documents submitted disclosed that Amelia Villamater is the registered owner of a parcel of land, particularly described as follows:

TCT No.

SUBDIVISION PLAN PSD-21767.BEING A PORTION OF LOT 1-B 176 DESCRIBED ON PLAN PSD-17092.G.L.R.O.RECORD NO "A PARCEL OF LAND(LOT 1-B-176-B OF THE

AREA OF THIRTY SIX THOUSAND NINE HUNDRED TWENTY TWO (36,922) SOUARE METERS.. . I201) SITUATEDIN THE BARRIO OF MABACAN MUNICIPALITY OF CALAUAN PROVINCE OF LAGUNA CONTAINING AN

that the Deed of Absolute Sale dated March 7, 2015 executed by Amelia Villamater in Five Hundred Twenty Five (33,525) square meter portion of the above described favor of MANADA PROPERTY HOLDINGS,INC.conveying Thirty Three Thousand property also provides that the remaining portion consisting of Three Thousand Three MARGARITA FABRO as disturbance compensation; that per Certification dated Hundred Ninety Seven (3,397) square meters shall be in the name of the HEIRS OF

March 17. 2015 issued by the OIC-Provincial Agrarian Reform Program Officer

Certification, it was certified that portion of the above-described property was given to (PARPO),Margarita Fabro is the tenant to a parcel of agricultural landholding covered byTransfer Certificate of Title (TCT) No. issued by the Provincial Agrarian Reform Adjudicator (PARAD) of Laguna in the said tenant as disturbance compensation with an area of Three Thousand Three DARABCase No. dated March 25, 2009: and that pursuant to the same based on aResolution

Hundred Ninety Seven (3,397) square meters.

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

Transactions umder this Act involving a transfer of ownership, whether "Sec. 66. Exemption from Taxes and Fees of Land Transfers.

FRANDO LAWOFFICE 362-2017 8-9-2017

from natural or juridical persons, shall be exempted from taxes arising from capital gains. These transactions shall also be exempted from the payment of registration fees, and all other taxes and fees for the convevance or transfer thereof. Provided, that all arrearages in real propertv taxes, without penalty or interest. shall be deductible from the compensation to which the owner may be entitled. "

allows disturbance compensation to the tenant as a result of extinguishment of tenancy Moreover, Section 36 (I) of RA 3844, as amended by Section 7 of RA 6389

relationship by reason of the reclassification or conversion of the agricultural land into non-agricultural land, to wit:

Notwithstanding any agreement as to the period or future surrender, of "Sec.36.Possession of Landholding;Exceptions.

the land, an agricultural lessee shall continue in the enjoyment and possession of his landholding, except when his dispossession has been due hearing it is shown that. authorized by the Court in a judgment that is final and executory if afier

"(1) The landholding is declared bv the department head upon recommendation of the National Planning Commission to be suited for residential, commercial. industrial or some other urban purposes: Provided. That the agricultural lessee shall be entitled to disturbance

preceding calendar years: compensation eauivalent to five times the average of the gross harvests on his landholding during the last five

disturbance compensation given to a tenant pursuant to Section 36 of RA 3844, as Only Section 35 of RA 3844 was expressly repealed by RA 6657. Hence,

amended by RA'6389, is still considered one of the transactions contemplated under Section 66 of RA 6657.

However, documents submitted failed to prove that the disturbance compensation received by the Heirs of Margarita Fabro was a result of 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 RA 3844, as amended by RA 6389. Also, based on the Certification issued bv the Provincial Agrarian Reform Officer (PARO), the lot covered by TCT No.

, with an area of Thirty Six Thousand Nine Hundred Twenty Two (36,922) square meters. is the retention area granted to Amelia Villamater pursuant to the latter's right of retention on agricultural land/s covered by the Comprehensive Agrarian Reform Program (CARP) as provided under Section 6 of RA No. 6657. Being a retention area. Said lot is outside the coverage of PD No. 27 and RA No. 6657. Such being the case. the transfer of the subject parcel of land in favor of the Heirs of Margarita Fabro is subject to capital gains tax and documentary stamp tax.

Please be guided accordingly.

Very truly yours.

oUa

Commissioner of Internal Reyenue CAESAR R. DULAY 008523 K-I-LMAT

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