Limcoma Rural Bank, Inc.

June 25, 2010 BIR RULING [DA-(C-027) 112-10] Sec. 27 (D) (5) & RR 17-2003; BIR Ruling No. 060-92, DA-237-05, DA-333-06 & DA-508-06 Limcoma Rural Bank, Inc. San Jose, Batangas Attention: Ms. Rufina S. Salas Managing Director Gentlemen : This refers to your letter dated March 23, 2010 requesting for legal opinion on the reckoning date for the payment of capital gains tax. As represented, you acquired a real property from the Philippine Deposit Insurance Corporation (PDIC) through a public bidding held on December 14, 2009. You paid the bidding deposit on the said date. You received the Certificate of Award and was given instruction to settle the balance of the bid price on December 22, 2009. PDIC prepared all the necessary papers and you received the notarized Deed of Sale dated February 19, 2010 on March 4, 2010. You paid the documentary stamp tax and the capital gains tax (CGT) on March 5, 2010 and March 8, 2010, respectively. The head of the assessment division of BIR District Office No. 59 in Lipa City maintains that you have to pay penalties for late payment of CGT based on the date of the full settlement of the bid price on December 22, 2010 although the Deed of Sale had not been issued. aTICAc You are, however, of the opinion that the date of reckoning for the payment of said tax should be the date of the Deed of Sale on February 19, 2010. In reply, please be informed that Revenue Regulations (RR) No. 17-2003, providing, among others, the policy that the capital gains tax on the sale, exchange or other disposition of real property classified as capital assets shall be collected as a final withholding tax, states as follows: "SECTION 5. Returns and Payments of Taxes Withheld at Source. Section 2.58 of Revenue Regulations No. 2-98, as amended, is hereby further amended to read as follows: "Sec. 2.58. Returns and Payment of Taxes Withheld at Source. (A) Monthly return and payment of taxes withheld at source. (1) . . . (2) WHEN TO FILE (a) For both large and non-large taxpayers, the withholding tax return, whether creditable or final (including final withholding taxes on interest from any currency bank deposit and yield or any other monetary benefit from deposit substitutes and from trust funds and similar arrangements) shall be filed and payments should be made, within ten (10) days after the end of each month, except for taxes withheld for the month of December of each year, which shall be filed on or before January 15 of the following year; and except for the final capital gains tax on the sale or other onerous disposition of real property considered as capital asset which must be taken/withheld from the seller by the buyer and remitted within thirty (30) days from the date of notarization of the transfer document to the collecting agent of the RDO having jurisdiction over the place where the property is located." xxx xxx xxx" (Emphasis provided.) In view of the foregoing, this Office is of the opinion that the reckoning date for the payment of capital gains tax is the date of notarization of the transfer document or in this case, the Deed of Sale (BIR Ruling Nos. 060-92, DA-237-05 dated May 31, 2005, 06 * dated May 19, 2006, DA-508-06 dated August 24, 2006) 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 as null and void. DcCHTa Very truly yours, Commissioner of Internal Revenue By: (SGD.) GREGORIO V. CABANTAC Deputy Commissioner Legal and Inspection Group