BIR Ruling [DA-221-05]

May 5, 2005 BIR RULING [DA-221-05] RR No. 24-02 Maybank Philippines, Inc . Legaspi Towers 300, Roxas Boulevard Manila Attention: Mr. Edwin V. Patricio Assistant Vice-President Gentlemen : This refers to your letter dated November 11, 2003 stating that Maybank Philippines, Inc. (MPI) acquired a real property from Spouses Alcide and Dahlia Amador through a foreclosure sale dated October 27, 2000; that the capital gains and documentary stamp taxes due in the said transaction were paid and the corresponding Certificate Authorizing Registration (CAR) was issued on December 19, 2000; that MPI subsequently sold the said realty to Spouses Francis and Adeliza Galero and Spouses Ernestito and Olivia Domingo on February 21, 2003; that it was only on March 7, 2003 that MPI proceeded to transfer the title of the subject property in its name; that the revenue district officer advised MPI to obtain a new CAR for the transfer of the title of the subject property in its name as the existing CAR had already lapsed, and likewise, to pay the capital gains and documentary stamp taxes plus increments on the transfer of the aforesaid property to Spouses Galero; that it is your contention that there is only one capital gains tax and documentary stamp tax due on the above transactions, hence, this request for a ruling on the foregoing matters. In reply thereto, please be informed that paragraph 3 of Section 4 of Revenue Regulations (Rev. Regs.) No. 24-02, provides as follows: "The CAR as issued by the Revenue District Officer shall have a validity period of one (1) year for purposes of presenting the same to the Register of Deeds. In case of failure to present the same to the Register of Deeds within the one-year validity period, the same may still be revalidated, but the total period of validity cannot exceed two years counted from the date of issuance of the CAR .Revalidation shall be done by stamping the phrase "Revalidated on _________, to expire on ___________",after validating the authenticity and validity of the old CAR sought to be revalidated. Thus, given the periods set herein, the CAR, upon issuance, shall have to be presented to the Register of Deeds within a maximum period of not more than two (2) years; otherwise, the CAR shall be deemed permanently expired and therefore of no effect. New returns and proof of tax payments shall be needed to produce a new CAR ." (Emphasis supplied) From the foregoing and since the CAR issued on the foreclosure sale of herein subject property was not presented by MPI to the concerned Register of Deeds within its period of validity and neither was the same revalidated within the prescribed period, the said CAR is deemed permanently expired and therefore of no effect. The taxpayer concern is hereby advised to file new returns covering the taxes imposed on the above transaction and to present proof of payments thereof. On the other hand, the subsequent sale of the above subject property by MPI to Spouses Galero and Spouses Domingo, a transaction apart from the foreclosure sale, is subject to the creditable withholding tax imposed under Rev. Regs. No. 6-2001, amending Rev. Regs. No. 2-98. This is so because under Rev. Regs. No. 7-2003, real properties acquired by banks through foreclosure sales are considered as their ordinary assets. The rate of the creditable withholding tax to be imposed shall be based on the gross selling price of the subject property which is defined under Rev. Regs. No. 6-2001 as the consideration stated in the sales document or the fair market value determined in accordance with Section 6(E) of the Tax Code, as amended, whichever is higher. Moreover, the foregoing transaction is subject to the documentary stamp tax imposed under Section 196 of the Tax Code, as amended. Further, and since there is delay in the filing of the returns and payment of the taxes due thereon, corresponding surcharge, penalties and interest shall be imposed accordingly. 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. TDcAaH Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group