BIR Ruling [DA-225-03]

July 16, 2003 BIR RULING [DA-225-03] 57 (B); 079-96 Primex Realty Corporation Ground Floor, Richbelt Terraces No. 19 Annapolis Street Greenhills, San Juan Metro Manila Attention: Atty. Ericson O. Ang Legal Affairs Manager Gentlemen : This refers to your letter dated March 5, 2003 stating that on September 16, 1991, a Contract to Sell and to Purchase was executed by and between Primex Realty Corporation, as developer, and Juanito Y. Lim and Julie T. Lim for and on behalf of Joyce, Jerry, Michelle, Karen and Irene, all surnamed Lim, as purchasers; the developer is the owner of Greenrich Mansion, an 18-storey commercial/residential condominium building with a total land area of 1,165 square meters located at Pearl Drive corner Lourdes St., Ortigas Complex, Pasig City covered by TCT No. PT-72407 issued by the Registry of Deeds for Pasig City; that the purchasers have offered to purchase and the developer have agreed to sell a condominium unit, described as Suite 10-D of Greenrich Mansion with floor area of 174 square meters and covered by CCT No. PT-8593 issued by the Registry of Deeds for Pasig, which shall be used exclusively for residential purposes, in the amount of P3,881,834.00 payable as follows: Due Date Particulars Amount 01-22-91 Reservation fee P100,000.00 02-22-91 1st payment 115,657.48 03-22-91 2nd payment 215,657.49 04-22-91 3rd payment 215,657.49 05-22-91 4th payment 215,657.49 06-22-91 5th payment 215,657.49 07-22-91 6th payment 215,657.49 08-22-91 7th payment 215,657.49 09-22-91 8th payment 215,657.49 10-22-91 9th payment 215,657.49 11-22-91 10th payment 215,657.49 12-22-91 11th payment 215,657.49 01-22-92 12th payment 215,657.49 02-22-92 13th payment 215,657.49 03-22-92 14th payment 215,657.49 04-22-92 15th payment 215,657.49 05-22-92 16th payment 215,657.49 06-22-92 17th payment 215,657.49 07-22-92 18th payment 215,657.49 Total P3,881,834.82 =========== that pursuant to then Section 50(b) of the Tax Code, as amended, the sale, exchange or transfer of real property whether held as capital or ordinary asset by Primex Realty Corporation is subject to 5% expanded withholding tax or a total amount of P194,091.74; and that the purchasers have failed to withhold the said amount but the developer has reported in its books as the income derived from the sale of its property, the amount of P12,823,094.67 which included the 5% expanded withholding tax for the aforementioned sale for the taxable year 1991 and for which the income tax is paid. In connection therewith, you now request for an opinion that the reported income of Primex Realty Corporation, as developer, in the amount of P12,823,094.67 which included the sale of the above-mentioned property, be deemed substantial compliance with the withholding tax requirements and that the subsequent issuance of the Certificate Authorizing Registration (CAR) by the RDO, is proper. ADaEIH In reply thereto, please be informed that since the gain realized by Primex Realty Corporation from the sale has already been reflected in its income tax return in the year of sale, there is substantial compliance with Revenue Regulations No. 6-85, as amended by Revenue Regulations No. 12-94 implementing Section 50(b) of then Tax Code, as amended. Such being the case, the RDO can now issue the corresponding CAR without requiring the payment of the creditable withholding tax by the buyer. (BIR Ruling No. 079-96 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, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group