Opal Portfolio Investments (SPV-AMC), Inc.

February 22, 2008 BIR RULING [DA-109-08] RA 9182; RR 6-2004; DA-063-2008 Opal Portfolio Investments (SPV-AMC), Inc. 6/F All Seasons Bldg., 112 Aguirre St. Legaspi Village, Makati City Attention: Ms. Imelda C. Tiongson General Manager Gentlemen : This refers to your letter dated January 16, 2008 stating that your company, Opal Portfolio Investments (SPV-AMC), Inc. (Opal for brevity), a Special-Purpose Vehicle Entity was incorporated pursuant to the provisions of Republic Act (RA) No. 9182, otherwise known as the Special Purpose Vehicle (SPV) Act of 2002. While in the process of transferring the titles to properties which you have sold, it is inevitable that you will incur delays in the filing of BIR Form 1606 (Capital Gains Tax/Withholding Tax Return) and BIR Form 2000 (Documentary Stamp Tax Return) due to clearances which have to be obtained from other Government Agencies, particularly the Department of Environment and Natural Resources (DENR) and Local Government Units (LGU) especially in far flung areas, as well as the COE which have to be secured from SEC. In your reading of Revenue Memorandum Order (RMO) No. 19-2007 dated August 8, 2007, it is your considered opinion that late filing of BIR Forms 1606 and 2000 fall under the provisions of 1997 Tax Code, Sec. 255, page 1 of Annex A and the same being a tax-exempt transaction, the penalty should only be P200 for each Return. However, some Revenue District Officers apply the Tax Code of 1997, Sec. 255 of page 2, Annex A which uses the selling price in the Deed of Sale as basis in the assessment of penalty, which in your view is applicable only to late filing of Returns for income tax, donors and estate taxes. You are now in the process of registering the transfer of the titles of properties which you have sold and would like an early resolution on this matter. In reply, please be informed that under Revenue Regulations (RR) No. 6-2004 dated March 31, 2004, the following SPV transactions are tax-exempt: EICScD a. Transfer by a Financial Institution (FI) of Real and Other Properties Owned or Acquired (ROPOA) covered by a Certificate of Eligibility (COE) issued by the Bangko Sentral ng Pilipinas (BSP) to an SPV; and b. Transfer by an SPV of ROPOA covered by a COE issued by the Securities and Exchange Commission (SEC) to a third party. The above transaction are exempt from payment of taxes, such as: 1) Documentary Stamp Tax (DST) on any document evidencing transfer or dation in payment as may be imposed under Title VII of the Tax C od e of 1997. cEHITA 2) Capital Gains Tax (CGT) on the transfer of land and/or building treated as capital asset in the hands of the transferor. 3) Creditable Withholding Income Taxes 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. Furthermore, Sec. 13 (c) of RR 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." HTcADC 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 Code or by rules and regulations promulgated thereunder to pay any tax, make 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 Sec. 255 of the 1997 Tax Code, for failure to file the required return is mandatory. However, this Office takes cognizance of the fact that since Opal is an SPV, and is an exempt entity under RA 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 an assignee. But this Office cannot close its eyes that the delay in filing the required returns and securing the necessary CAR by Opal is clearly beyond its control, inasmuch as one of the causes for the inevitable delay is due to the clearances which must first be secured from different government agencies in far flung areas. As such, the delay lies not with Opal but clearly from factors, beyond its control. Accordingly, this Office holds that the imposition of the penalties prescribed in Section 255 of the Tax Code of 1997 is devoid of legal basis. aCHDST This ruling is being issued on the basis of the foregoing facts as represented. If upon investigation, however, it is 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