BIR Ruling [DA-710-99]

December 28, 1999 BIR RULING [DA-710-99] R.A. 7916; R.R. 12-97 & 1-95 DA-333-98 DA-710-99 Greenfield Development Corporation 2/F Greenfield Building, 759 Shaw Boulevard Mandaluyong City Attention: Atty . Garney M . Candelaria Gentlemen : This refers to your letter dated July 27, 1999 requesting this office to instruct the BIR Revenue District Office No. 57 to issue the corresponding Certificate Authorizing Registration (CAR) to enable your lot buyer NST 1 Corporation to register the land under its name. It is represented that Balibago Land Corporation (BLC) is a PEZA-registered developer/operator of Greenfield Automotive Park-Special Economic Zone (GAP-SEZ) which is a 50.01 hectare economic zone located in Barangay Don Jose, Sta. Rosa, Laguna; that under the Registration Agreement with PEZA, GAP-SEZ, is exempt from all national and local taxes; that likewise, under BIR Ruling DA 333-98 dated July 21, 1998 signed by DCIR Sixto S. Esquivias IV, Legal & Enforcement Group, it was held that BLC, as PEZ Developer or Operator, is exempt from income tax, capital gains tax, value-added tax and all other national and internal revenue taxes in lieu of payment of the five percent (5%) final tax on its gross income computed in accordance with subsection (2), Section 2, Rule XX of the Rules and Regulations to Implement R.A. No. 7916; that BLC sold a parcel of land with an area of P10,000 sq. m. (PSD-04-116622) located at Barangay Don Jose, Sta. Rosa, Laguna and covered by TCT No. T-193314, in favor of NST 1; that within the prescribed period from the execution of the sale, the appropriate tax returns were submitted to the BIR RDO No. 57 for the purpose of securing the CAR for which the said RDO No. 57 would like to withhold the 5% tax on gross income on the above transaction; and that you contended, however, that pursuant to the aforementioned BIR Ruling, such withholding is improper as the preferential rate of 5% on gross income is payable on or before the 15th day of the fourth month following the close of the taxable year, as provided for under Rev. Regs. No. 12-97. Hence, this request. In reply, please be informed that in the light of the aforementioned BIR Ruling DA-333-98 issued in your favor by this Office, which categorically states that "In view of the foregoing, this Office is of the opinion that the development, operation, sale or lease of lots by your client, BALIBAGO LAND CORPORATION, as a PEZA Ecozone Developer or Operator is exempt from income tax, capital gains tax, value-added tax and all other national internal revenue taxes. In lieu thereof, your client is liable to pay the five (5%) final tax on its gross income from the said activities computed in accordance with subsection (2), Section 2, Rule XX of the Rules and Regulations to Implement R.A. No. 7916. Consequently, it is likewise exempt from the creditable expanded withholding tax pursuant to Section 2.57.2(J) of Revenue Regulations No. 2-98. (BIR Ruling No. DA-198-98 dated May 15, 1998; DA-54-98 dated February 12, 1998)" llcd this Office hereby holds that since BLC is exempt from the creditable withholding tax, it should not be withheld of the 5% tax on gross income for its sale of that certain parcel of land covered by TCT No. T-193314. However, while the amount equal to five percent (5%) of the gross income shall be remitted and paid on or before the 15th day of the fourth month following the close of the taxable year in accordance with Section 4 of Rev. Regs. No. 12-97, the same should not affect the time for filing of the quarterly and final or adjustment returns as provided for under Section 7(c) of Revenue Regulations No. 1-95. (BIR DA-046-99 dated January 25, 1999). Such being the case, BLC is still required to file the quarterly and final or adjustment returns and pay the corresponding tax thereon equivalent to the 5% of the gross income appearing on the return filed for the particular period. Thus, such sale of real property to NST 1 Corporation should be declared on the returns filed for the period, and consequently, pay the equivalent 5% tax appearing thereon. prcd Accordingly, if BLC has already filed its quarterly return with the above transaction duly disclosed and the corresponding tax for the period covered duly paid, as required under said Rev. Regs. No. 1-95, BIR RDO No. 57 may, hereinafter issue the CAR or TLC for the purpose of registering the property in the name of NST 1 Corporation. 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.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group