BIR Ruling [DA-066-01]

April 20, 2001 BIR RULING [DA-066-01] The Regional Director Revenue Region No. 17 Butuan City S i r : This refers to the Particulars of Concern indicated in your Summary Report of Staff Meeting Discussions for the months of November and December 2000, as follows: 1. November - (a) Clarification as to the taxability of ordinary assets foreclosed by banks; (b) Clarification as to the deadline for payment of CGT and CWT on real properties foreclosed by banks; 2. December - Clarification regarding exemption from tax of monetized leave credits. In reply, please be informed as follows: 1. The Bank's inventory of foreclosed properties which are mandated by law to be disposed of within a period not longer than five (5) years are ordinary assets the gain or loss from the sale of which are to be included in computing the Bank's net taxable income during the year pursuant to Sec. 28(A) of the 1997 Tax Code. Considering that the disposition of said foreclosed properties qualifies the Bank to be habitually engaged in the real estate business, income from sale or disposition of the same is subject to the creditable withholding taxes provided for in Section 4 of Revenue Regulations No. 8-98, which amended pertinent portions of Revenue Regulations No. 2-98. (BIR Ruling No. 143-99 dated September 14, 1999) On the deadline for payment of CWT on real properties foreclosed by banks, Section 5 of said Revenue Regulations No. 8-98 explicitly provides that "Creditable withholding taxes deducted and withheld by the withholding agent/buyer on the sale, transfer or exchange of real property classified as ordinary asset, shall be paid by the withholding agent/buyer upon filing of the return with the Authorized Agent Bank (AAB) located within the Revenue District Office (RDO) having jurisdiction over the place where the property being transferred is located within ten (10) days following the end of the month in which the transaction occurred. Provided, however, that taxes withheld in December shall be filed on or before January 25 of the following year." 2. In answer to your question concerning the exemption of monetized leave credits of Government Officials and Employees under Executive Order No. 291, we have deemed it proper to quote hereunder pertinent portion of Revenue Regulations 10-2000 dated December 14, 2000, viz : "(7) Vacation and sick leave allowances . Amounts of "vacation allowances or sick leave credits" which are paid to an employee constitute compensation. Thus, the salary of an employee on vacation or on sick leave, which IS paid notwithstanding his absence from work, constitutes compensation. However, the monetized value of unutilized vacation leave credits of ten (10) days or less which ARE paid to PRIVATE employees during the year AND THE MONETIZED VALUE OF LEAVE CREDITS PAID TO GOVERNMENT OFFICIALS AND EMPLOYEES SHALL NOT BE SUBJECT TO INCOME TAX AND CONSEQUENTLY TO WITHHOLDING TAX." aScIAC "xxx xxx xxx It is hoped that we have sufficiently clarified you regarding the above Particulars of Concern of your region for the said months. Very truly yours, (SGD.) MILAGROS V. REGALADO Acting Assistant Commissioner (Legal Service)