BIR Ruling [DA-486-98]

November 11, 1998 BIR RULING [DA-486-98] Santiago, Corpuz & Ejercito Law Offices 6th Floor, Pacific Center San Miguel Avenue, Ortigas Center Pasig City Attention: Attys . Domingo A . Santiago, Jr . and Gregorio S . Ejercito, Jr . Gentlemen : This refers to your letter dated October 15, 1998, requesting on behalf of your client, Metropolitan Bank and Trust Company (MBTC), for clarification on the following issues: (a) whether or not your client's filing of capital gains tax (CGT) and documentary stamp tax (DST) returns and its payments of said taxes with RDO, San Fernando for its purchase at an extrajudicial foreclosure auction sale of mortgaged real properties is proper and valid; (b) whether or not RDO-San Fernando, Pampanga will be the one to issue the Tax Clearance Certificate (TCL)/ Certificate Authorizing Registration (CAR) pursuant to RMO No. 17-97; and (c) whether or not Revenue Regulation No. 8-98 would apply to the transaction. It is represented that MBTC is a mortgagee of adjoining real properties located in Sta. Cruz, Manila pursuant to a Real Estate Mortgage (REM) executed by the mortgagors whose business address is Timog Park, Angeles City, Pampanga; that due to the default of the mortgagors. MBTC foreclosed the REM on the properties and said properties were auctioned by the Acting Ex-Officio Sheriff and Clerk of Court of the Regional Trial Court of Manila; that MBTC was the highest bidder and purchaser of said mortgaged property per the Certificate of Sale dated September 7, 1998; that subsequently, MBTC's representative was referred by BIR Revenue District Office (RDO) Manila to RDO San Fernando, Pampanga for the purpose of filing and paying the CGT and DST returns since the address of the mortgagor was Angeles City, Pampanga per the REM; that MBTC was assessed by RDO San Fernando of the CGT and DST on the sale of the real properties classified as capital asset; that MBTC filed the CGT and DST returns and paid the taxes due thereon on September 18, 1998 at RDO, San Fernando; that recently, RDO, San Fernando refused to issue the Tax Clearance Certificate (TCL) or Certificate Authorizing Registration (CAR) contending that the payment should be made in the residence of one of the mortgagors who happened to have the Special Power of Attorney to mortgage the properties, which is in Pasig City; and that one of the mortgagors, a corporation, continues to have its principal place of business in Angeles City. In reply, please be informed that under Section 51(B) of the Tax Code of 1997, the return shall be filed with an authorized agent bank, Revenue District Officer, Collection Agent or duly authorized Treasurer of the city or municipality in which such person has his legal residence or principal place of business in the Philippines, or if there be no legal residence or place of business in the Philippines, with the Office of the Commissioner. In relation with Section 56(A)(3) of the Tax Code of 1997, such place of filing is also the place of payment inasmuch as payment shall be made on the date the return prescribed therefor is filed by the person liable thereto. Accordingly your client has duly filed and paid the capital gains tax as well as the documentary stamp tax in RDO-San Fernando which is the business address of the mortgagors-sellers and also principal place of business of one of the mortgagors. In this connection the prime concern of the Bureau of Internal Revenue is evidently the collection of taxes. (BIR Ruling No. 007-98 dated February 4, 1998) Moreover, Section 3.1 of Revenue Memorandum Order (RMO) NO. 17-97, provides that, for capital gains tax as well as the documentary stamp tax 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 Tax Clearance Certificate (TCL)/Certificate Authorizing Registration (CAR) shall be issued by the RDO where the seller-transferor is registered or is required to be registered. (BIR Ruling No. 007-97 dated January 22, 1997). Thus, since the business address of the mortgagors in the REM is Timog Park, Angeles City, which is the principal place of business of one of the mortgagors where it is registered or required to be registered, RDO-San Fernando, Pampanga should be the one to issue the aforenamed TCL/CAR. On the other hand, BIR Revenue Regulation No. 8-98 issued on August 25, 1998 and published in a national daily newspaper on September 5, 1998, took effect fifteen (15) days after its publication or on September 21, 1998. Under, Section 6 thereof, the RDO of the Revenue District where the property being transferred is located shall be the one to issue the corresponding TCL/CAR for the registration of the real property in favor of the transferee. Considering that the payment was made by your client on September 18, 1998 or before the effectivity of RR No. 8-98, RMO No. 17-97 should, therefore, apply. 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, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)