August 13, 1992

BIR RULING NO. 223-92

21(e) 163-82 223-92

PHIL-VILLE DEVELOPMENT
& HOUSING CORP.
17 Gov. Pascual Ave., Malabon,
Metro Manila

Attention : Ms. Cecilia Que Yabut

Gentlemen:

        This refers to your letter dated 14 August 1991 requesting a ruling on whether the transfer-assignment of a portion of your agricultural land to your tenants, is subject to tax.

        It appears that Phil-Ville owns an agricultural land located at Brgy. Perez, Meycauayan Bulacan; that to get full control of said agricultural land, it transferred-assigned to its tenants, namely: Ignacio Encarnado and Eleonora dela Cruz, said agricultural land, without consideration but with a condition to surrender their tenancy rights on said land to Phil-Ville; that the parties executed a "Kasulatan ng Pagsasalin" conveying said land covered by Transfer Certificate Title No. 1225550 to its tenants as a form of disturbance compensation.

        In reply, please be informed that under Revenue Regulations No. 1-90 implementing Sec. 50(b) of the Tax Code as amended (RMC No. 7-90), all sales, exchanges or transfers of real properties (whether classified as ordinary or capital asset) by corporations and in the case of individuals, estates trusts, trust fund or pension funds, sales, exchanges, or transfers of real properties classified as ordinary assets consummated on or after January 1, 1990, are subject to the creditable withholding tax.

        Administrative Order No. 15 Series of 1988 IV (E), does not apply in your case, since there must be an order by the Department of Agrarian Reform (DAR) granting the distribution of homelots to tenant-lessees by landowners as a form of disturbance compensation.

        Such being the case, the transferor upon execution of deed of transfer of its property shall be subject to the 5% creditable withholding tax and documentary stamp tax as imposed under Sec. 196 of the Tax Code.

Very truly yours,

(SGD.) JOSE U. ONG

Commissioner of Internal Revenue