BIR Ruling [DA-512-06]

August 25, 2006 BIR RULING [DA-512-06] BIR Ruling No. 088-94 dtd. 3/18/94 DA-022-2003 dtd 1/28/03 ASB Realty Corporation 4/F, St. Francis Square Doa Julia Vargas Avenue Corner Bank Drive, Ortigas Center Mandaluyong City Attention: Rolando P. Domingo Senior Vice-President Gentlemen : This refers to your letter dated July 19, 2006, requesting confirmatory ruling on your opinion that the proposed Deeds of Assignment and the proposed Final Deeds of Sale of three (3) condominium units of the Malayan Plaza which are executed by the Assignor in favor of the assignees are not subject to expanded withholding tax considering that the said income had already been reported by the seller in the year of the sale and the assignees merely step into the shoes of the assignor. It is represented that ASB Realty Corporation (ASBRC, for short) is an entity organized and existing under the laws of the Philippines, with principal office at 4th Floor, St. Francis Square, Julia Vargas Ave. cor. Bank Drive, Ortigas Center, Mandaluyong City; that ASBRC originally developed and constructed ASB Malayan Tower Project (now The Malayan Plaza) located at ADB Ave., cor. Ortigas Center, Pasig City; that ASBRC was issued a BIR Ruling that since all its sales and income therefrom during the period 1996 to 1999 were already reported in full in the year of sale and the income taxes thereon for the said years were already paid, it is no longer subject to creditable withholding tax on the transfer of CCT's upon its full payment; that however, before the completion of the payment, a buyer of three (3) condominium units proposed to assign his right over the units to three (3) assignee corporations; that it is your opinion that these Deeds of Assignments and Deeds of Sale are not subject to the expanded withholding tax since the assignees merely steps into the shoes of the assignor, but the assignor shall be liable for whatever gain he may realize thereafter. CHDAEc In reply, please be informed that since all your sales and income in 1996 to 1999 were already reported in full in the year of sale and the income taxes thereon for the said years were already paid as alleged pursuant to Section 2.57.2(J) of Revenue Regulations No. 2-98, as amended, the subject Deeds of Assignment and Deeds of Sale will no longer be subject to the expanded withholding tax, since a Deed of Assignment is a document transferring a right or interest over the property. Moreover, the assignor can not transfer more than what he appears to have. The assignee merely steps into the shoes of the assignor. The execution of the Deeds of Sale over the subject three (3) condominium units will not result to taxable events inasmuch as the sale of such, sometime in 1996 to 1999 and income therefrom had been reported by the seller in the year of sale. Thus, the assignee corporations (buyers) are no longer required to withhold any creditable expanded withholding tax on their payments. (E. L. Punsalan & Associates, BIR Ruling No. 88-94 dated March 18, 1994) DTIcSH 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.) JAMES H. ROLDAN Assistant Commissioner Legal Service