Is a CARP Land Transfer Exempt From Capital Gains Tax and Documentary Stamp Tax? RA 6657 Section 66 Explained

Section 66 of Republic Act No. 6657, the Comprehensive Agrarian Reform Law, exempts a land transfer made under the Comprehensive Agrarian Reform Program (CARP) from capital gains tax, registration fees, and other taxes and fees for the conveyance — and, under BIR rulings, that also reaches documentary stamp tax. The exemption attaches only to the CARP transfer itself, not to whatever the land’s recipient does with it afterward.

This post explains what Section 66 exempts, why documentary stamp tax is included, and where the exemption stops applying. For how the regular capital gains tax and documentary stamp tax work outside CARP, see BIR Form 1706: How to File Capital Gains Tax on Sale of Real Property and Documentary Stamp Tax on a Deed of Sale of Real Property: Rate and Filing.

What does RA 6657 Section 66 exempt? #

Section 66 of Republic Act No. 6657 (the Comprehensive Agrarian Reform Law, which established CARP) exempts a transaction involving a transfer of ownership of land under the program from three categories of charges: capital gains tax, registration fees, and all other taxes and fees for the conveyance or transfer of the property. The exemption applies whether the landowner giving up the land is a natural person or a juridical entity (such as a corporation), so the exemption is not limited to individual landowners.

The exemption is built into the law that created CARP itself, rather than into a separate tax regulation, which is why it reaches beyond capital gains tax to registration fees and the broader residual category of other taxes and fees tied to the conveyance.

Does the exemption cover documentary stamp tax too? #

Yes — multiple BIR rulings interpret that residual category of other taxes and fees in Section 66 as reaching the documentary stamp tax (DST) imposed under Section 196 of the Tax Code, which is the DST on deeds of sale and other conveyances of real property. The reasoning in these rulings is that DST is substantially a tax on the transaction itself, not merely a tax on the piece of paper documenting it — so a transaction that Section 66 frees from other taxes and fees for the conveyance should not still carry a DST bill.

The practical result: a CARP-covered land transfer is treated as exempt from both the 6% capital gains tax and the documentary stamp tax that would otherwise apply to a conveyance of real property, not capital gains tax alone.

Where does the exemption stop applying? #

The exemption attaches only to the transfer of ownership transaction that happens under the agrarian reform program itself — it does not follow the land into whatever happens next. CARP’s transfer of ownership chain typically runs from the landowner, through government acquisition, to the qualified farmer-beneficiary, often evidenced by a Certificate of Land Ownership Award (CLOA). Any transaction that is not directly part of that CARP transfer chain falls back under the regular tax rules.

This matters most for a farmer-beneficiary who, after receiving land through CARP, later sells that land on the open market to an unrelated third party. That resale is a separate, ordinary transaction outside RA 6657 Section 66 — it is not part of the original agrarian reform transfer — and it is taxed normally: the regular capital gains tax, documentary stamp tax, and other applicable taxes and fees apply, the same as any other sale of real property. The exemption does not run with the land forever; it covers the specific transfer the statute describes.

Worked example: landowner compensation vs. a farmer-beneficiary’s later resale #

The same piece of land can sit on both sides of the exemption line depending on which transaction is being taxed. The scenario below is illustrative.

A landowner’s agricultural land is placed under CARP coverage. The Land Bank of the Philippines pays the landowner just compensation for the land, and the land is later awarded to qualified farmer-beneficiaries through a CLOA.

• The landowner’s compensation from this transfer: Because this transfer of ownership happens under CARP itself, RA 6657 Section 66 applies. The landowner’s just compensation is not reduced by the normal 6% capital gains tax or by documentary stamp tax — both are exempted, along with registration fees.
• A later resale by the farmer-beneficiary: Suppose, years afterward, the farmer-beneficiary who received the land sells it to a private buyer with no connection to the agrarian reform program. That sale is not a transfer of ownership under CARP — it is an ordinary, subsequent transaction. The farmer-beneficiary’s sale is subject to the regular capital gains tax and documentary stamp tax rules, the same as any other seller of real property classified as a capital asset.

What about unpaid real property tax on CARP-covered land? #

A related but secondary point: any arrears in real property tax on land covered by a CARP transfer are deducted from the compensation the landowner receives, without penalty or interest. Rather than requiring the landowner to settle outstanding real property tax separately before the transfer proceeds, the unpaid amount is simply netted against the just compensation due, and no penalty or interest is added on top of the arrears themselves.

Frequently asked questions #

Is land transferred under CARP exempt from capital gains tax? #

Yes. Section 66 of Republic Act No. 6657, the Comprehensive Agrarian Reform Law, exempts transactions involving a transfer of ownership of land under the Comprehensive Agrarian Reform Program from taxes arising from capital gains, among other taxes and fees, regardless of whether the landowner is a natural person or a juridical entity.

Does the RA 6657 Section 66 exemption also cover documentary stamp tax? #

Yes, based on BIR rulings. Section 66 exempts the transfer from capital gains tax, registration fees, and all other taxes and fees for the conveyance of the property. Multiple BIR rulings interpret all other taxes and fees to include the documentary stamp tax imposed under Section 196 of the Tax Code, reasoning that the tax is substantially on the transaction itself, not merely on the document.

If a farmer-beneficiary later sells land received under CARP, is that sale also tax-exempt? #

No. The Section 66 exemption applies specifically to the transfer of ownership under the agrarian reform program itself. A later resale by a farmer-beneficiary to a private buyer outside the program is a separate, ordinary transaction and is subject to the regular capital gains tax, documentary stamp tax, and other applicable taxes and fees.

Who pays the landowner for land acquired under CARP? #

The Land Bank of the Philippines pays the landowner just compensation for agricultural land acquired under the Comprehensive Agrarian Reform Program, and the land is later awarded to qualified farmer-beneficiaries, typically through a Certificate of Land Ownership Award.

What happens to unpaid real property tax on land covered by a CARP transfer? #

Any arrears in real property tax on land covered by a CARP transfer are deducted from the compensation the landowner receives, without penalty or interest.

Summary #

RA 6657 Section 66 exempts the transfer of land ownership under CARP from capital gains tax, registration fees, and — per BIR rulings reading the law’s residual other-taxes-and-fees category to include it — documentary stamp tax as well. The exemption covers the agrarian reform transfer chain itself: government acquisition from the landowner and the subsequent award to a qualified farmer-beneficiary. It does not extend to a later, ordinary resale by the farmer-beneficiary to a private buyer outside the program, which remains subject to the regular capital gains tax and documentary stamp tax rules. Unpaid real property tax on the land is simply deducted from the landowner’s compensation, without added penalty or interest.