Unimark Investments (SPV-AMC) Corporation

February 1, 2008 BIR RULING [DA-063-08] Unimark Investments (SPV-AMC) Corporation 2/F All Seasons Building 122 Aguirre Street, Legaspi Village Makati City Attention: Mr. Danilo C. Castro President Gentlemen : This refers to your letter dated November 12, 2007 stating that your company is a special purpose vehicle entity incorporated pursuant to the provisions of Republic Act (R.A.) No. 9182, otherwise known as the Special Purpose Vehicle (SPV) Act of 2002, as implemented by Revenue Regulations No. 6-2004; that as such it is exempt from the following taxes, to wit: a) Documentary stamp tax (DST) on any document evidencing transfer or dation in payment as may be imposed under Title VII of the Tax Code of 1997; b) Capital gains tax (CGT) on the transfer of land and/or building treated as a capital asset in the hands of the transferor; c) Creditable withholding income tax on the transfer of land and/or building treated as an ordinary asset in the hands of the transferor pursuant to Revenue Regulations No. 2-98, as amended. that in the process of transferring the titles on the land which it has sold, it is inevitable that it will incur delays in filing BIR Form No. 1606 (Capital Gains Tax/Withholding Tax Return) and BIR Form No. 2000 (Documentary Stamp Tax Return) due to clearances which have to be secured from other Government Agencies, particularly the Department of Environment and Natural Resources (DENR) and the Local Government Units (LGU) concerned; and that in securing the necessary Certificate Authorizing Registration (CAR) from the district office concerned a corresponding penalty was assessed based on the selling price as stated in the sales document pursuant to Section 255 of the Tax Code of 1997. ASTIED Based on the foregoing representations, you now request for an opinion as to whether or not there is a legal basis for the imposition of the corresponding penalties prescribed under Section 255 of the Tax Code of 1997 on a tax exempt transaction like the SPV under R.A. No. 9182, as implemented by Revenue Regulations No. 6-2004. In reply thereto, please be informed that Section 13 (c) of Revenue Regulations No. 6-2004 provides that "(c) Upon presentation of the Capital Gains Tax Return, together with the corresponding COE and the documentary requirements as mentioned in the preceding paragraph, the Revenue District Office (RDO) where the property being transferred is located, shall issue the corresponding Tax Clearance Certificate (TCL) and Certificate Authorizing Registration (CAR) for the registration of the real property in favor of the transferee: Provided, That, in case the transferor is an FI, no such TCL/CAR shall be issued unless all applicable taxes on the previous transfer to the FI have been duly paid when the taxes became due or paid thereafter but subject to appropriate increments and penalties." On the other hand, Section 255 of the Tax Code of 1997 provides that " Failure to File Return, Supply Correct and Accurate Information, Pay Tax, Withhold and Remit Tax and Refund Excess Taxes Withheld on Compensation. Any person required under this C od e or by rules and regulations promulgated thereunder to pay any tax, makes a return, keep any record, or supply correct and accurate information, who willfully fails to pay such tax, make such return, keep such record, or supply such correct and accurate information, or withhold or remit taxes withheld, or refund excess taxes withheld on compensation, at the time or times required by law or rules and regulations shall, in addition to other penalties provided by law, upon conviction thereof, be punished by a fine of not less than Ten thousand pesos (P10,000) and suffer imprisonment of not less than one (1) year but not more than ten (10) years. xxx xxx xxx" It is undisputed that the imposition of the penalties prescribed in Section 255 supra, for failure to file the required return, is mandatory. However, this Office takes cognizant of the fact that since Unimark is an SPV, and as such an exempt entity under R.A. No. 9182, it is nevertheless required to file the corresponding returns on the above-mentioned transaction for purposes of securing the necessary TCL/CAR so that title to the property may be transferred to the assignee. But this Office cannot close its eyes that the delay in filing the required returns and securing the necessary CAR by Unimark is clearly beyond its control. Thus, in securing the clearance from the different government agencies like the DENR and Local Government Units concerned in far flung areas indeed is one of the factors for the delay. Accordingly, the fault therefore lies not in Unimark but to other factors. EHTADa SUCH BEING THE CASE, this Office holds that the imposition of the penalties prescribed in Section 255 of the Tax Code of 1997 is devoid of legal basis. 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 and void. Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service