BIR Ruling [DA-223-97]

June 17, 1997 BIR RULING [DA-223-97] Pambansang Korporasyon sa Elektrisidad (National Power Corporation) Diliman, Quezon City Attention: Ms . Carmencita B . Nero Manager Welfare Fund Services Division Gentlemen : This refers to your letter dated January 19, 1995 stating that the NPC Irisan Housing Project in Baguio City was completed and awarded to qualified NPC employees; that in the process of transferring ownership to individual awardees, the Revenue District Office at Baguio City required them to pay the 7.5% withholding tax; that you requested on September 27, 1994 approval of capital gains tax exemptions, however, you have not yet received a response from the Revenue District Officer and that the latter even continued charging your individual awardee the 7.5% withholding tax; that in another NPC undertaking, the Tandang Sora Housing Project at Tandang Sora, Quezon City, it was granted tax exemption on capital gains because the developer and owner of the housing project is a government entity as evidenced by the Certificate Authorizing Registration signed by then BIR Commissioner Jose U. Ong; that this capital gains tax exemption has been consistently granted to the National Power Corporation; and that the Transfer Certificate of Title is in the name of the National Power Corporation and being transferred to the individual awardee's name upon full payment of the loan equivalent to the cost of lot awarded to him. acd Based on the foregoing representations and documents submitted, you are now requesting, in effect, for a ruling that the sale and transfer of your NPC Housing Project at Irisan, Baguio City in favor of your employees/awardees is exempt from the payment of the 7.5% creditable withholding tax because the owner and seller is NPC, a government entity land owner of subject property. In reply, please be informed that under Section 4(a) of Revenue Regulations No. 6-85 otherwise known as the Revised and Consolidated Expanded Withholding Tax Regulations, as amended by Revenue Regulations No. 12-94 implementing Section 50(b) of the Tax Code, as amended, the withholding of tax prescribed in these regulations shall not apply to income payments to the national government and its instrumentalities, including provincial, city or municipal governments as well as government-owned or controlled corporations. Such being the case, and since you are a government owned and controlled corporation, and the recipient of the income payments, the sale and transfer of your housing project at Irisan, Baguio City in favor of your employees/awardees which is incidentally, being handled for purposes of expediency by the Napocor-Employees Savings and Welfare Plan, is therefore exempt from the payment of the 7.5% creditable withholding tax imposed under Revenue Regulations No. 6-85, as amended by Revenue Regulations No. 12-94 implementing Section 50(b) of the Tax Code, as amended. Furthermore, the Deed of Sale executed to effect such sale and transfer is subject to the documentary stamp tax imposed under Section 196 of the Tax Code, as amended, based on the actual consideration appearing in the Deed of Sale or zonal valuation whichever is higher. (Revenue Memorandum Order No. 41-91) Very truly yours, SIXTO S. ESQUIVIAS IV OIC, Assistant Commissioner (Legal Service)