BIR Ruling [DA-126-01]

July 24, 2001 BIR RULING [DA-126-01] Sec. 200 (B); R#17-97 BR #050-96 BAP Credit Guaranty Corporation 28/F Antel 2000, 121 Valero St. Salcedo Village, Makati City Attention: Atty . Jose D . Reyes Head-Legal Department Gentlemen : This refers to your undated letter stating that on November 13, 1997 and November 14, 1997, BAP Credit Guaranty Corporation (BCGC), a domestic financing corporation with business address at 28th/F Antel 2000 Corporate Center Bldg., 12 Valero St., Salcedo Village, Makati City, foreclosed nine (9) parcels of land situated in Subic, Zambales [EJF case Nos. 16-0-97 and 17-0-97] and one (1) condominium unit situated in Sta. Mesa, Metro Manila [EJF Case No. 97-1280], all registered under the name of Subic Realty Corporation / Florentino Caja, Sr. of Subic Hills Village, Aningway, Subic, Zambales in accordance with the provision of Act 3135, as amended by Act 4118; that consequently, two (2) Certificates of Sale were issued in favor BCGC on January 7, 1998 for the transactions conducted in Subic and another Certificate of Sale on February 16, 1998 for the auction made in Manila, being the sole bidder in the public auctions conducted on December 17 and 22, 1997; that the documentary stamp taxes on the transactions in Subic were paid on the date of the issuance of the Certificates of Sale; that however, a surcharge of P2,615.00 was assessed against BCGC on the transactions as shown by Revenue Official Receipt No. 00273221 on the pretext that one Certificate of Sale was dated January 5, 1998 which was received on January 6, 1998; that on February 26, 1998, when BCGC tried to pay the documentary stamp tax due on the Certificate of Sale for the foreclosure sale made in Manila and the capital gains tax for all the transactions with RDO No. 18 of Olongapo City, a DST surcharge of P1,500.00, CWT surcharge of P729.37 and a penalty of P6,000.00 were assessed against BCGC for the Manila transaction; that the Revenue District Officer based his findings that the DST should have been paid within ten (10) days following the month when the auction sale was conducted; that the representative of BCGC pointed out that the Certificate of Sale was issued and signed only on February 16, 1998; that in fact, he was able to secure a certification from the Clerk of Court to that effect; that he also presented Revenue Memorandum Order (RMO) No. 1-98 dated January 2, 1998, in relation to Section 200(B) of the Tax Code of 1997, specifically paragraph 2, Sub-topic No. 19, which addresses squarely the situation; that another issue raised by said RDO required BCGC to secure a certification from the mortgagor to the effect that the real properties subject to mortgage are part of its/his capital assets in relation to its/his business as a real estate corporation and that unless BCGC secure a ruling contrary to the foregoing arguments of the local BIR, the local BIR office in Olongapo City will assess BCGC not only the CGT, but also surcharges, interest and penalty. Based on the foregoing representations and documents submitted, you are now requesting for a ruling as to whether or not BCGC is liable to pay the surcharges, interest and penalty on the documentary stamp and capital gains taxes being assessed by the Revenue District Office No. 18 of Olongapo City on the aforesaid foreclosure sale. In reply, please be informed that the above issue raised by the Revenue District Office No. 18 of Olongapo City are answered as follows: 1. On the issue as to when the documentary stamp tax on said foreclosure sale became due Under Section 200(B) of the Tax Code of 1997, the tax return prescribed under Section 200 shall be filed within ten (10) days after the close of the month when the taxable documents are made, signed, issued, accepted or transferred, and the tax thereon shall be paid at the same time the aforesaid return is filed. In this connection, this Office ruled in BIR Ruling No. 050-96 dated April 11, 1996 relative to the request of Pag-ibig Fund for a ruling allowing it to pay its obligations to all BIR Offices concerning foreclosed properties based on the date of the issuance of the Certificate of Sale rather than the actual date of the auction sale, that a Certificate of Sale is the evidence of the perfection of a contract or a sale. Accordingly, the request of Pag-ibig Fund was granted. Applying the aforecited Section 200(B) of the Tax Code of 1997 and BIR Ruling No. 050-96 dated April 11, 1996 in the instant case, this Office is of the opinion as it hereby holds that the documentary stamp tax due on the aforesaid foreclosure sale became due within ten (10) days following the month when the Certificate of Sale were issued to the highest bidder, BCGC. Accordingly, BCGC having paid the documentary stamp tax on the foreclosure sale conducted in Subic on January 7, 1998, on the date of the issuance of the Certificate of Sale on said transaction, and tried to pay the documentary stamp tax on the auction sale conducted in Manila on February 26, 1998, ten (10) days after the issuance of the Certificate of Sale in said foreclosure sale held in Manila, it is not therefore, subject to the surcharge, interest and penalties being assessed against it. 2. On the issue that the capital gains tax, creditable withholding tax and documentary stamp tax should be paid at the postal address of the seller as indicated in the TCT Under paragraph 3.3.1 of Revenue Memorandum Order (RMO) No. 17-97 dated April 11, 1997, it is stated that on every sale, exchange or transfer of real property, whether classified as ordinary or capital asset made by an individual, estate or trust or by a corporation, the TCL / CAR shall be issued by the RDO where the seller transferor is registered or is required to be registered. In connection therewith, under paragraph 3.2 of RMO No. 17-97, the tax return and all the taxes due on the transaction involving transfer of real property (i.e. capital gains tax or creditable withholding tax, documentary stamp tax) should be filed and paid in the RDO where the seller-transferor is registered. Applying the foregoing provisions of Revenue Memorandum Order No. 17-97 in the instant case, it appears that the seller-transferor is registered under the name of Subic Realty Corporation / Florentino A. Caja, Sr. of Subic Hills Village, Aningway, Subic, Zambales. Hence, RDO No. 18, Olongapo City, is the RDO where the seller-transferor is registered or is required to be registered, and therefore, it is the RDO authorized to process and issue TCL / CAR with respect to the transfer of the said real property and it is likewise the RDO where the tax return and all the taxes due on the transactions i.e., creditable withholding tax and documentary stamp tax, should be filed and paid. 3. On the issue that the RDO No. 18 is requiring you to secure a certification from the mortgagor to the effect that the real properties subject to the mortgage are part of its capital assets in relation to its business as real estate corporation The requirement is no longer necessary considering that the mortgagor is engaged in the realty business. 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. ITSacC Very truly yours, (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner Legal and Inspection Group