BIR Ruling [DA-040-06]

February 9, 2006 BIR RULING [DA-040-06] 58; 77; #011-2005; DA-373-2000 SGV & Co . 6760 Ayala Avenue 1226 Makati City Attention: Atty. Veronica A. Santos Tax Principal Gentlemen : This refers to your letter dated February 6, 2006 requesting on behalf of your clients, United Overseas Bank Philippines ("UOBP") and Onshore Strategic Assets, Inc. ("OSA") for approval of a scheme covering the filing and payment of creditable withholding tax ("CWT") which would fall due on the transfer of certain assets located in various localities all over the Philippines. The localities fall under the jurisdiction of over a hundred Revenue District Offices (RDOs). It is represented that UOBP is in possession of certain real and other property owned and acquired ("ROPOAs") consisting of 3,000 parcels, which it intends to transfer to OSA, a domestic corporation. The immediate transfer of the ROPOAs is warranted because of certain commitments made by UOBP, including but not limited to its need to dispose of such ROPOAs within five (5) years from the acquisition thereof, under pain of administrative sanctions. The transfer/selling price will be paid via installments over a three (3) year period. However, upon the execution of the transfer document (the "Transfer Document"), it is intended that OSA will acquire property rights over the ROPOAs which will enable OSA to book said rights as an asset in its financial statements. The proposed scheme is described as follows : 1. Not later than the 10th day of the month following the month of execution for the Transfer Document, OSA, as the withholding agent, will prepare the pertinent CWT returns for each of the ROPOAs. It is proposed and requested that the CWT returns as well as the payment of the CWT be made via a lump-sump payment at the BIR Head Office, or if the latter is not possible, at an RDO to be designated by the BIR Commissioner. The request is being made to enable OSA and UOBP to conclude the transaction within the shortest possible period in lieu of pursuing the asset transfers in tranches in order to meet the deadlines for the payment of the CWT. Conversely, while the proposed scheme affords the parties a less cumbersome filing and payment scheme, the government also stands to benefit from the lump-sum remittance of the CWT which is estimated at Two Hundred Million Pesos (P200,000,000.00) based on the higher of transfer or zonal value, which amount would otherwise have been remitted in tranches over a three (3) year period. 2. The actual deeds of conveyance covering each parcel will be executed upon receipt of full payment of the transfer price, at which time the pertinent documentary stamp taxes (DST) shall likewise be paid. It is proposed that the DST returns and the corresponding payments will be made at the RDO with jurisdiction over the subject properties. In accordance with the provisions of Revenue Regulations (RR) No. 12-80, it is also proposed that the Certificate Authorizing Registration ("CAR") will be secured from said RDO. For this reason, it is essential that the BIR ensure that the BIR Head Office will record the lump-sum payment made at the Head Office (or the designated RDO, if applicable) to the respective RDOs where the ROPOAs are located (i.e. as if payment were made to the RDOs), so that the RDOs will be able to issue the corresponding tax clearances. aScITE In reply, please be informed that Section 58(A) of the Tax Code of 1997, as amended, provides, to wit: "SEC. 58. Returns and Payment of Taxes Withheld at Source . (A) Quarterly Returns and Payments of Taxes Withheld . Taxes deducted and withheld under Section 57 by withholding agents shall be covered by a return and paid to, except in cases where the Commissioner otherwise permits , an authorized agent bank, Revenue District Officer, Collection Agent, or duly authorized Treasurer of the city or municipality where the withholding agent has his legal residence or principal place of business, or where the withholding agent is a corporation, where the principal office is located." (Emphasis supplied) The aforequoted provision is not violated by the proposed scheme in the payment of CWT as long as the aforementioned payment scheme, although different from the manner of filing and payment provided under Section 58(A) of the Tax Code, as amended, is duly approved by the Commissioner of Internal Revenue. In BIR Ruling No. DA-373-2000 dated October 25, 2000, the Commissioner of Internal Revenue granted the request of a taxpayer to file and pay the capital gains tax outside the jurisdiction of the respective RDOs based on the exigency of the case and to generate immediately the much needed revenues by the Government. This Office had occasioned to rule in BIR Ruling No. 011-2005 dated August 10, 2005, which provides, to wit: "After due consideration, this Office finds the foregoing scheme acceptable inasmuch as the change of venue for filing and payment of the tax does not necessarily mean that the revenue collection of the BIR has been compromised. Rather, the direct credit of the amount of tax to the demand deposit account of the Treasurer of the Philippines being maintained with BSP for the BIR's account assures an immediate and direct remittance to the Government. Such being the case, this Office hereby authorizes the BSP to pay and file its CGT returns at BIR RDO No. 33 in Manila using the above payment scheme. This will serve as authority for the Revenue District Officer of RDO No. 33 to process the Certificate Authorizing Registration (CAR) corresponding to the property/ies and release the same to the BSP, when CGT is paid under this arrangement." Furthermore, a similar transaction was approved by this Office last December 20, 2005 concerning the request of Prudential Bank to pay the taxes due on the consolidation of foreclosed/dacioned properties located in different regions within the Philippines, at BPI-Greenbelt Branch, regardless of the location of the properties due to time constraint, provided that the pertinent RDOs (located in different Revenue Regions) will be credited with the collections, as the BIR system is capable of monitoring and tracking the same. In view of the foregoing, this Office hereby approves your proposed payment scheme, whereby the CWT returns as well as the payment thereof be made through a lump-sum payment at the Large Taxpayers Service (LTS), BIR Head Office, provided that the payments will be credited to the appropriate RDOs where the property is located for purposes of issuance of the respective Certificates Authorizing Registration. To facilitate the acceptance of payment by the LTS, UOBP, being an identified Large Taxpayer, is advised to file the CWT returns under its name for the account of OSA. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation it will be disclosed that the facts are different, then this ruling shall be considered null or void. Very truly yours, (SGD.) JOSE MARIO C. BUAG Commissioner of Internal Revenue