BIR Ruling No. 355-2021

REPUBLIC OF THE PHILIPPINES

BUREAU OF INTERNAL REVENUE DEPARTMENT OF FINANCE

Quezon City

Sections 24 (D) (1} and 57 (B),Tax Code of 1997; Revenue Regulations No. 2-98, as BIR Ruling No. 1109-2018 BIR Ruling No. 471-2019; amended: C* HC 4221 555 -732

OSCAR M. ARNIEGO, et. al.

Marikina City

Gentlemen:

This refers to your letter dated October 23, 2019 requesting for exemption from income tax, capital gains tax (CGT) and/or withholding tax, documentary stamp tax (DST) and other

employees of ITTI Shoes and Mano Shoes/MANOLO SAMSON, namely: Raul Marasigan, pertinent taxes on the awards for separation pay and other damages received by the former Remy Pagdato, Cristina Glova, Domingo Sacao Jr., Erlea Panoy and Domingo Lepalam.

As represented, Labor Arbiter Jasper Z. Dela Cruz issued Writ of Execution on June 2.

incurred in the execution proceedings. In compliance with the Writ of Execution, levy/attachment was made upon the real property covered with Transfer Certificate of Title (TCT) No. monetary award due to the employees, and Php owned by Mr. Manolo Samson. 2017 for the recovery, by way of distraint, of the amounts of Php : as execution fee and other expenses representing

conveying the said property to the employees was issued on December 13, 2017. and won the bidding in the amount of Php During the public auction for the sale of the above property, the employees participated The Sheriff's Certificate of Sale

properties successfully levied and acquired through public auction. You now seek to request for exemption from payment of taxes on the transfer of real

considered a capital asset, Section 24 (D) (1) of the National Internal Revenue Code (T'ax Code) of 1997, as amended, states that: In reply, please be informed that if the real property covered by TCT No. Is

"SEC. 24. Income Tax Rates.

XXX XX XXX

(D Capital Gains from Sale of Real Property.

market value as determined in accordance with Section 6(E) of this Code. final tax of six percent (6%) based on the gross selling price or current fair In General. -- The provisions of Section 39(B) notwithstanding. a

OSCAR M. ARNIEGO, et. al. Page 2 of 2 (, - ICt 1! H

or to government-owned or controlled corporations shall be determined either realized from the sale, exchange, or other disposition of real property located in the Philippines, classified as capital assets, including pacto de retro sales and 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 under Section 24 (A) or under this Subsection, at the option of the taxpaver. whichever is higher, is hereby imposed upon capital gains presumed to have been other forms of conditional sales, by individuals, including estates and trusts:

strained interpretation. It shall be construed in its plain and simple meaning. "Disposition" means had the occasion to rule that the Tax Code of 1997, as amended, does not define nor qualify the phrase "other disposition." It is clear, plain and therefore must be applied without attempted or an act of disposing; transferring to the care or possession of another; the parting with, alienation of, or giving up property. In the case of Salud vs. Commissioner of Internal Revenue,I the Court of Tax Appeals

another tax treatment pursuant to different provisions of the Tax Code of 1997, as amended. excluding it from the coverage of Section 24 (D) (1) of the Tax Code of 1997, as amended, is deemed included within the purview of said provision. Therefore, it shall be subject to the CGT disposition" includes within its purview all kinds of dispositions of real property under Section 24 (D) (1) of the Tax Code of 1997, as amended, unless specifically excluded therefrom or subject to Thus, the Sheriff's Certificate of Sale dated December 13, 2017, in the absence of a specific law imposed therein. Applying the above ruling of the Court, it is therefore clear. that the phrase "other

the Tax Code of 1997, as amended, is likewise subject to the DST imposed in Sections 188 and I 96 of the Tax Code of 1997, as amended. Moreover, the conveyance being a disposition of real property under Section 24 (D) (1) of

pay and other damages is subject to the applicable Creditable Withholding Tax (CWT). the Tax Code of 1997, as amended, shall apply. Thus, the conveyance of the aforesaid real property in favor of the complainant-employees by way of auction sale as payment of separation 2.57.2 (J) of Revenue Regulations (RR) No. 2-98, as amended, implementing Section 57 (B) of However, in case the real property that is subject to transfer is an ordinary asset, Section

buyers are constituted as the withholding agents required to withhold the CWT. to deduct and withhold the CWT, states that insofar as taxable sales, exchanges or transfers of real property are concerned, the buyers are constituted as withholding agents. Although ITTI Shoes and Mano Shoes/MANOLO SAMSON is the one liable to pay the CWT, the complainant- Accordingly, Section 2.57.3 of RR No. 2-98, as amended, providing for persons required

Please be guided accordingly.

Very truly yours. oexoMY

K-I Commissioner of Internal Revenue CAESAR R. DULAY 0450

1 CTA E8 Case No. 412 dated April 30, 2009.