Atty. Lhoritess Loreto-Collado

September 18, 2008 BIR RULING [DA-(C-070)-235-08] DA225-03 Atty. Lhoritess Loreto-Collado iRekrut Manpower, Inc. 4th Floor Casman Building 1198 Quezon Avenue Quezon City M a d a m : This refers to your letter dated July 28, 2008 stating that on March 5, 2005, a Contract to Sell was executed by Premiere Development Bank, as Seller, and Spouses Arlan Delas Armas and Cecille Delas Armas (Spouses Armas), as the Buyer, to purchase a parcel of land together with the improvements thereon located at Cainta, Rizal and covered by TCT No. 662502 issued by the Registry of Deeds for the Province of Rizal; that the contract stipulated that payment of the purchase price shall be divided into several payments which are embodied in the Contract to Sell; that following the usual routine, the Bank declared the sale on its 2005 Income Tax Return and paid for the income taxes due thereon even before complete receipt of the full purchase price; that on July 15, 2008, a Deed of Absolute Sale was executed by the Bank in favor of Spouses Armas, since in the said Contract to Sell and Deed of Absolute Sale, it was stipulated that the payment of capital gains tax, withholding tax and documentary stamp tax shall be shouldered by the Bank, Spouses Armas did not withhold the corresponding taxes on the said sale; and that the income taxes for the sale constitute more than the withholding taxes due on the said transaction, and said income taxes were duly declared and paid for the taxable year 2005. Based on the foregoing representations, you now request for confirmation of your opinion that since the income taxes for the sale constitute more than the withholding taxes due on the transaction, and said income taxes were duly declared and paid for the taxable year 2005 before actual and complete receipt of the purchase price is deemed substantial compliance with the withholding tax requirements and that the corresponding CAR may now be issued without requiring the payment of the aforesaid tax. In reply thereto, please be informed that this Office had already ruled on the matter when it said in BIR Ruling No. DA225-2003 dated July 16, 2003, as follows ". . . since the gain realized by Primex Realty Corporation from the sale has already been reflected in its income tax return in the year of sale, there is substantial compliance with Revenue Regulations No. 6-85, as amended by Revenue Regulations No. 12-94, implementing Section 50(b) of then Tax Code, as amended. Such being the case, the RDO can now issue the corresponding CAR without requiring the payment of the creditable withholding tax by the buyer." Considering that the above-cited ruling is in all fours similar to the instant case, this Office hereby confirms your opinion that since the income tax was duly declared and paid for the taxable year 2005 even before the actual and complete receipt of the purchase price by the said Corporation, there is substantial compliance with the withholding tax requirements. Consequently, the RDO concerned may now issue the corresponding CAR so that title to the property may now be transferred in the name of Spouses Arlan Delas Armas and Cecille Delas Armas. caSEAH 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