BIR Ruling No. 315-2018

REPUBLIC OF THE PHILIPPINES

DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE Quezon City

Secs.24 (D)(1) and 27 (D)(5): BIR Ruling No. 11:-2013 RR 9-2012

t 315-2018 3-5-2018

2710 Taft Ave.. Pasay City HUBERT IVAN C. CHAN

Sir:

This refers to your letter dated September 4, 2015, requesting for a ruling on how many taxable transfers there are in a foreclosure sale of real property.

Documents submitted disclosed that Chyrrl Julian Pulido, (married to Marlon Limas Pulido) (the Owner), is the registered owner of a Condominium Unit (Unit 19D, The Residences at Greenbelt Manila Tower, Special 1-bedroom type with an approximate area of 80 sq.m. located in the 19th fioor, with one (1)"appurtenant parking slot 3F1 18) covered by Condominium Certificates of Title (CCT) No. that on November 11, 2008, the Owner obtained a loan from the BPI family Savings Bank, Inc. secured by a mortgage over the Subject Property: that upon the Owners default, BPI family Savings Bank, Inc. caused the extra-judicial foreclosure of the mortgage on the Subject Property; that during the public auction on Julv 23. 2014. Huhert ivan C. Chan emerged as the highest bidder for the total sum of : that the sheriff's certificate of sale dated August 4, 2014 was issued to Hubert Ivan C. Chan: that on August 13, 2014. the certificate of sale was duly annotated on the CCT No. (1) year redemption period has lapsed. with Entry No. ; and that the one

In reply: please be informed that Sections 24 (D) (1) and 27 (D) (5) of the Tax Code of 1997 provides. viz:

"Section 24. Income Tux Rates. -

(D Capital Gains from Sale of Real Property.

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

market value as determined in accordance with Section 6(E) of this Code.

have becn realized from the sale, exchange. or other disposition of real whichever is higher, is hereby imposed upon capital gains presumed to

property located in the Philippines. classified as capital assets, including pacto de retro sules and other forms of conditional sales, by individuals. including estates and trusts:

XXX XXX XXX

Hubert b'an C. Chan Page - of'3 15-208 -5-2018 . :

SEC. 2-. Rutes of Incone tax on Domestic Corporations.

XXX XXX XXX

(D) Rates of Tax on Certain Passive Incomes.

XXX XXX XXX

on the gain presumed to have been realized on the sale, exchange or disposition of lands andior buildings which are not actually used in the business of a corporation and are treated as capital assets. based on the gross selling price of fair market value us determined in accordance with Lunds and/or Buildings. - A final tax of six percent (6%) is hereby imposed Section 6(E) of this Code, whichever is higher, of such lands and/or buildings. (5) Capital Gains Realized from the Sale. Exchange or Disposition of :

Moreover. Section 2 of Revenue Regulations No. 9-2012'. provides:

mortugugees/selling persons or entities, the Capital Gains Tax (CGT) imposed under Section 196 of the Tax Code shall become due. Redemption Period. - In case of non-redemption of properties sold during involuntury sales, regardless of the type of proceedings and personalin' of imposed under Sections 24(D)(1) 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 Section 57 and RR 2-98, as amended if the property is an ordinary' asset: the Value-udded Tax (VAT) imposed under Section I06 of the Tax Code Section 2. Taxability' of Owner 's'Mortgagor 's Failure to Redeem his Foreclosed Auctioned Off Property/ies within the Applicable Statutory a capital usset; or the Creditable Withholding Tax (CWT) imposed under and RR 16-2005. us umended: and the Documentary Siamp Tax (DST)

the CGT or CWT due from the sale, shall then file the CGT return and remit the suid tax to the Bureau within thirty (30) days from the expiration the month afier expiration of the applicable statutory redemption period. following year. 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 provided that. for"taxes withheld in December, the CW"T return shall be filed and the iuxes remitted to Bureau on or before January 15 of the The buver of the subiect property, who is deemed to have withheld

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

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

of the consideralion (hid price of the highest bidder) or the fair market The CGT!(WT'WAT and DST shall be based on whichever is higher

non-redemption of properties sold during involuntary sales. : Implementing Sections 24(D; ( i . 57. 106 and 196 of the National Intermal Revenue Code of 1997 on

Hubert Ivan C. Chan Page 3 of 3 3-5-2018

value or the zonal value as determined in accordance with Section 6(E) of the Tax Code.

The subject sale effected through public auction. being a disposition of real property under Section 24(D)(1) of the Tax Code of 1997 enumerated above, is subject to the capital gains tax (CGT) of 6% on the capital gains presumed to have been realized from the said conveyance of real property considered as capital assets. It is likewise subject to documentary stamp tax (DST) imposed under Sections 196 of the Tax Code of 1997.

sale arising from the foreclosure of the subject property, there will be only one taxable transaction, that is. from the Owner to the highest bidder. Since Hubert Ivan C. Chan is Considering that the conveyance of the property is`caused by the public auction

the highest bidder, the transfer of the title to the property in his name from the Owner could be effected only after the payment of the 6% capital gains tax and documentary

bidder) or the fair market value or the zonal value as determined "in accordance with stamp tax based on whichever is higher of the consideration (bid price of the highest Certificate of Sale to the proper Revenue District Officer for purposes of the issuance Section 6 (E) of the Tax,Code of 1997. Hubert Ivan C. Chan should present the

2013) of the Certificate Authorizing Registration (CAR), a requirement for the transfer of titie in the Office of the Register of Deeds. (BIR Ruling No. 111-13 dated March 22.

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

Very truly yours,

Aoay

K-1-JRC Commissioner of Internal Revenue CAESAR R. DULAY 013964