BIR Ruling [DA-523-06]

August 31, 2006 BIR RULING [DA-523-06] RR 6-04; 8-98; Sec. 248; DA-040-2006 Bahay Financial Services (BFS) 24/F, BPI Buendia Center, Sen. Gil J. Puyat Avenue Makati City Attention: Mr. Frederico Y. Cadiz Authorized Representative Gentlemen : This refers to your letter dated April 20, 2006 requesting for an approval to adopt a centralized filing and payment scheme for all internal revenue taxes due on the consolidation of properties acquired through conveyance, foreclosure or dacion located in different regions within the Philippines, and likewise, for the centralized filing and payment of creditable withholding tax (CWT) due and corresponding to the eventual transfer of these properties. The localities fall under the jurisdiction of approximately 94 Revenue District Offices (RDO's). The facts as represented are as follows: On November 9, 2005, Balikatan Housing Finance Inc. (BHFI) acquired a total of 52,289 non-performing loan accounts secured by residential real property from the National Home Mortgage Finance Corporation (NHMFC). While all efforts to reach a financial solution to all these would be exerted, in certain cases, the borrowers will opt to convey the collateral (mortgaged property) in settlement of the loan. In other cases foreclosure may be resorted to. Considering that the non-performing loans have long been delinquent, BHFI, through its subsidiary, Balikatan Property Holdings, Inc. (BPHI), expects to acquired and sell approximately 30,000 properties located in various localities all over the Philippines. In all its acquisitions, BPHI would have to file the returns and pay the capital gains tax (CGT) and documentary stamp tax (DST) within the prescribed period at the Revenue District Office (RDO) where the property is located. Likewise, any disposition by BPHI of any property will require the latter to file the CWT returns and pay the same at the RDO where the property is located. The properties involved in these transactions are housing units that BPHI intends to resell to low-income earners at affordable financing schemes. Aside from the difficulty of traveling all over the country and incurring huge transportation expenses which will be passed on to buyers, it would be too burdensome and time consuming for BPHI, whose only office is situated in BPI Buendia Center, Sen. Gil Puyat Avenue, Makati City, to be paying the corresponding CGT, DST, or CWT for approximately 30,000 properties in over ninety (90) RDOs spread all over the country. SATDHE In view of the foregoing, you are proposing to adopt the scheme described as follows: 1. CGT Within 30 days after the execution of a conveyance document or within 30 days from the expiration of the redemption period, it is proposed and requested that BPHI file the pertinent CGT returns and pay the CGT due through the Electronic Filing and Payment System (EFPS) at the BPI Buendia Center Branch [an Authorized Agent Bank (AAB)]. 2. DST Within 5 days following the end of the month in which the conveyance document is executed or within 5 days following the end of the month in which the redemption period in a foreclosure proceeding has expired, it is proposed and requested that BPHI file the pertinent DST returns and pay the DST due through the EFPS at the BPI-Buendia Center Branch . 3. CWT Within 10 days following the end of the month in which the sale document of its acquired property is executed, BPHI will file the pertinent CWT returns and make payments thereof through the EFPS at the BPI - Buendia Center Branch . Your above requests are being made to enable BPHI to conclude all its transactions within the shortest possible period and in order for BPHI to meet the deadlines set by the Tax Code for the required tax payments. While the proposed schemes will allow BPHI a less cumbersome filing and payment process, the government stands to benefit since the same will enable it to raise the much needed government revenues expediently and expeditiously. 4. In relation to the provision of Revenue Regulations No. 06-04, it is proposed that the Certificate Authorizing Registration (CAR) will be secured from each RDO with jurisdiction over the subject property/ies. For this reason, it is essential that the RDOs be credited with the collections to be monitored and tracked by the BIR system, to enable the said RDOs to issue the corresponding tax clearances. In this connection, the BIR is requested to waive the applicability of the provisions of Revenue Regulations No. 8-98 which require the filing and payment of CGT and CWT within the RDO having jurisdiction over the place where the property being transferred is located; as well as Section 248(A)(2) of the Tax Code imposing surcharges on improper filing of return. In reply, please be informed that on several occasions, the Commissioner of Internal Revenue granted the request of taxpayers to file tax returns and pay the taxes due thereon outside the jurisdiction of the respective RDOs based on the exigency of the case and to generate immediately the much needed revenues by the Government. (BIR Ruling No. DA-040-2006 dated February 9, 2006 citing BIR Ruling Nos. DA-273-2000 dated October 25, 2000 and 011-2005 dated August 10, 2005) In view thereof and since the above proposed centralized payment scheme would prove beneficial to all the parties as it will allow BPHI a less cumbersome filing and payment process, thus, affording convenience to it, and on the other hand, enabling the National Government to improve its cash flow without delay, the proposed centralized payment scheme of BPHI, therefore, is hereby approved as follows: 1. Filing of CGT returns and payment thereof Within 30 days after the execution of a conveyance document or within 30 days from the expiration of the redemption period, BPHI will file the pertinent CGT returns and pay the CGT due through the Electronic Filing and Payment System (EFPS) at the BPI Buendia Center Branch [an Authorized Agent Bank (AAB)]. 2. Filing of DST returns and payment thereof Within 5 days following the end of the month in which the conveyance document is executed or within 5 days following the end of the month in which the redemption period in a foreclosure proceeding has expired, BPHI will file the pertinent DST returns and pay the DST due through the EFPS at the BPI-Buendia Center Branch. 3. Filing of CWT returns and payment thereof Within 10 days following the end of the month in which the sale document of its acquired property is executed, BPHI will file the pertinent CWT returns and make payments thereof through the EFPS at the BPI Buendia Center Branch. BPHI will file the CWT returns under its name for the account of its buyers. The payments made by BPHI will be credited to the appropriate RDOs where the properties are located for purposes of issuance of the respective CARS. The foregoing shall be considered as an exception to the procedures laid down under Revenue Regulations Nos. 06-04 and 8-98. Consequently, the penalties and surcharge imposed under Section 248(A)(2) of the 1997 Tax Code, as amended, for improper filing of return are hereby waived. STcADa In order to facilitate the crediting of payments to the RDOs, BPHI is hereby required to submit a report of the properties being transferred to the Office of the Deputy Commissioner, Information Systems Group, in the format prescribed by said office. Moreover, BPHI is hereby required to furnish the RDOs concerned a copy of this approval of your request. Please be guided accordingly. (SGD.) JOSE MARIO C. BUAG Commissioner of Internal Revenue