May 7, 1997

DAR OPINION NO. 49-97

Mrs. Natividad C. Ednave

2411 Selya Street

Pandacan, Manila

Dear Mrs. Ednave:

This has reference to your letter dated 17 April 1997 seeking opinion on the queries posed therein, to wit:

a.)        Whether a landholding covered under the Comprehensive Agrarian Reform Program (CARP) sold by the landowner to a tenant is subject to Capital Gains Tax?

b.)       Whether the sale by the landowner to you and your husband of a 4-hectare untitled agricultural land for seventy thousand pesos (P70,000.00) is subject to Capital Gains Tax?

Anent your first query, Section 66 of R.A. No. 6657 (Comprehensive Agrarian Reform Law) expressly provides, quote: "transactions under this Act involving a transfer of ownership, whether from natural or juridical persons, shall be exempted from taxes arising from capital gains". The exemption referred to above is not however encompassing so as to exempt all transactions from Capital Gains Tax. Specifically, only transactions which are agrarian related are exempt. In this connection, the sale or disposition of the subject property from the landowner to a tenant is undoubtedly an agrarian related transaction, thus exempt from said tax. However, all other transactions or subsequent transfers thereof from the tenant to third persons are not exempt from Capital Gains Tax since the same are no longer deemed agrarian related matters.

Anent your second query, as mentioned above, a sale by the landowner to a tenant is exempt from Capital Gains Tax because it is an agrarian related transaction. Such being the case, the privilege of tax exemption accorded by R.A. No. 6657 shall in like manner be enjoyed by you and your husband for you are lawfully entitled thereto on the assumption that both of you are indeed tenants.

We hope to have clarified the matters with you.

Very truly yours,

(SGD.) ARTEMIO A. ADASA JR.

Undersecretary for Legal Affairs, and Policy and Planning