BIR Ruling [DA-183-97]

April 16, 1997 BIR RULING [DA-183-97] SGV & Co. 6760 Ayala Avenue Makati City Attention: E . C . Alcantara Gentlemen : This refers to your letter dated March 21, 1997 requesting for the waiver of surcharge and penalty incident to the failure to withhold the creditable withholding tax due on the sale of real property by Citibank N.A. to T & O Holdings. It is represented that Citibank N.A. is a foreign corporation primarily engaged in the business of banking; that in 1995, Citibank N.A. sold a portion of the 29th floor of CitiTower Building to T & O Holdings for a total amount of P79,538,480.00; that the buyer failed to withhold the corresponding 7.5% creditable withholding tax on the sale; that this notwithstanding, Citibank N.A. reported in its Corporation Annual Income Tax Return for the year 1995, the gain or income derived from the sale of the 29th floor of CitiTower Building, necessarily exposing the same to corporate income taxes at the rate of 35%. Based on the foregoing representations, you are now requesting confirmation of your opinion that the reported income of Citibank N.A. from the sale of its real property, of which the amount of income was subjected to the corporate income tax at the rate of 35%, which is more than 7.5% of the amount required to be withhold, be deemed substantial compliance with the withholding tax requirements and that the subsequent issuance of the Certificate Authorizing Registration (CAR), is proper. In reply, please be informed that since the gain to be realized by Citibank N.A. from the said sale of real property has already been reflected in its income tax return in the year of sale and the taxes paid therefore is more than the 7.5% creditable income tax to be withheld, this Office is of the opinion as it hereby holds, that there is substantial compliance with Revenue Regulations No. 6-85, as amended by Revenue Regulations No. 12-94 implementing Section 50(b) of the Tax Code, as amended. Such being the case, the RDO can now issue the corresponding Certificate Authorizing Registration (CAR) without requiring the payment of the creditable withholding tax by the buyer. (BIR Ruling No. 79-96 dated July 24, 1996) 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, ALICIA P. CLEMENO Assistant Commissioner (Legal Service) By: ALICIA L. TOMACRUZ Head Revenue Executive Assistant (Legal Service)