Republic of the Philippines
HOUSE OF REPRESENTATIVES
‘Quezon City

SIXTEENTH (16™) CONGRESS
First Regular Session

1758

House Bill No.

Introduced by Hon. Joseph Gilbert F. Violago

EXPLANATORY NOTE

Besides police power, the power of taxation is certainly one of the more potent power
exercised by the State over its citizens. While the former may be said to be potent only in
emergency situations; the latter, without a doubt, rules our daily lives regardless of the times.

And to safeguard against its abuse, the 1987 Constitution clearly mandates that the law
on taxation must be both uniform and equitable. And if I may add, it must also be flexible and
constantly attuned to the times. Hence, this bill.

Certainly, one of the principal reasons why owners of lands and buildings are not enticed
to sell their real properties to the government lies in the fact that under our present laws, these
transactions are subject to the payment of capital gains tax on gains realized from said
transactions.

Therefore, in order to encourage private owners to sell their real properties to the
government; and for the government to utilize them as offices in the case of buildings, or for the
construction of schools, hospitals, and other infrastructure projects in the case of lands, this
representation proposes to exempt any person, natural or juridical, who sells any real property to
the government or any of its political subdivisions or instrumentalities, from the payment of
capital gains tax.

With this tax incentive in place, hopefully, the government's perpetual need for suitable
lands and/or buildings to carry out its mandate of providing infrastructure projects to the

people will be addressed.
ee
|. JOSEPH F. VIOLAGO.

Representative
24 District, Nueva Ecija


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SIXTEENTH (16™) CONGRESS
First Regular Session

House Bill No. 1758

Introduced by Hon. Joseph Gilbert F. Violago

AN ACT
EXEMPTING ANY PERSON WHO SELLS ANY REAL PROPERTY TO THE GOVERNMENT OR
ANY OF ITS POLITICAL SUBDIVISIONS OR INSTRUMENTALITIES FROM THE PAYMENT
OF CAPITAL GAINS TAX AND FOR OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

SECTION 1. Section 24 (D) (1) of Republic Act No. 8424, otherwise known as the “National
Internal Revenue Code of the 1997” is hereby amended to read as follows:

“(l) In General. - The provisions of Section 39(B) notwithstanding, a final tax of six
percent (6%) based on the gross selling price or current fair market value as determined in
accordance with Section 6(E) of this Code, whichever is higher, is hereby imposed upon
capital gains presumed to have been realized from the sale, exchange, or other disposition of
real property located in the Philippines, classified as capital asset, including pacto de retro sales
and other forms of conditional sales, by individuals, including estates and trusts: Provided,
That [the tax liability, if any, on gains from sales or other dispositions] ANY SALE of real
property to the government or any of its political subdivisions or agencies or to government-
‘owned or-controlled corporations shall be EXEMPT FROM THE PAYMENT OF CAPITAL
GAINS TAX [determined either under Section 24(A) or under this Subsection, at the option of
the taxpayer];”

SEC. 2. Section 27 (d) (5) of Republic Act No 8424, otherwise known as the “National Internal
Revenue Code of 1997” is hereby amended to read as follows:

“() Capital Gains Realized from the Sale, Exchange or Disposition of Lands and/or
Buildings. - A final tax of six percent (6%) is hereby imposed on the gain presumed to have
been realized on the sale, exchange or disposition of lands and/or buildings which are not
actually used in the business of a corporation and are treated as capital assets, based on the
gross selling pric3e or fail market value as determined in accordance with Section 6(B) of this
Code, whichever is higher. Of such lands and/or buildings[.]: PROVIDED, THAT ANY SALE
OF REAL PROPERTY TO THE GOVERNMENT-OWNED OR-CONTROLLED
CORPORATIONS SHALL BE EXEMPT FROM THE PAYMENT OF CAPITAL GAINS TAX
WHETHER OR NOT SUCH REAL PROPERTY ARE ACTUALLY USED IN THE BUSINESS.”

SEC. 3. The Department of Finance shall issue the necessary rules and regulations to
implement the provisions of this Act.

SEC. 4. All laws, presidential decrees, executive issuance, rules and regulations, or parts
thereof, found inconsistent with this Act are hereby expressly repealed or modified accordingly.

SEC. 5. If, for any reason whatsoever, any provision of this Act is declared unconstitutional,
the same shall not affect the validity of the other provisions not declared as such.

SEC. 6. This Act shall take effect upon its approval and fifteen (15) days following its
publication in at least two (2) newspapers of general circulation.

Approved,