Marina Seaview Dev't. Corp.

December 22, 2009 BIR RULING [DA-(C-331) 807-09] RMO 41-91; 27; #172-92; #300-93; DA-138-95; #036-2000; DA-207-02; DA-484-03; DA-440-06; DA-461-07 Marina Seaview Dev't. Corp. No. 42, Sto. Domingo Street Quezon City Attention: Mr. Alfonso G. Siy Gentlemen : This refers to your letter dated December 21, 2009 requesting for confirmation of your opinion that the sale of real properties by Star Asset Management ROPOAS, Inc. ("Star Asset" for brevity) through auction sale/public bidding in favor of Marina Seaview Development Corporation ("Marina Seaview" for brevity), is subject to creditable withholding tax and documentary stamp tax, based on the highest or winning bid price. Star Asset is a corporation duly organized and existing under and by virtue of the laws of the Republic of the Philippines. It is registered with the Securities and Exchange Commission (SEC) on December 14, 2006 with Company Registration No. CS200619425 and Company TIN 006-590-370. The primary purpose for which Star Asset is organized is to invest in, or acquire non-performing assets (NPAs) of financial institutions (FIs), including real or other properties acquired by such FIs through foreclosure or dacion. It is likewise allowed by its charter to sell, transfer or otherwise dispose of such assets to third parties. On September 18, 2009, Star Asset sold its properties consisting of eleven (11) vacant lots located at Asiaworld City, Paraaque City, on an "as-is, where-is" basis, via a sealed bidding process. Marina Seaview submitted the highest bid for four (4) lots covered by Transfer Certificates of Title No. T-175473, T-175475, T-177428 and T-175474 (the "Properties"), all located along Bay Boulevard, Asiaworld City. Marina was thereafter declared the winning bidder with respect to the said lots. On September 24, 2009, Star Asset issued a Notice of Award in favor of Marina Seaview. Generally, the creditable withholding tax and documentary stamp tax due on the above transaction should be based on whichever is higher of the sale consideration (winning bid price), or the zonal value. The winning bid price for the properties is P15,500 per square meter. On the other hand, the properties' current zonal value is pegged at P25,000 per square meter. EHCcIT In reply, please be informed that under Revenue Memorandum Order No. 41-91 dated November 11, 1991, among the exceptions to the use of zonal valuation as tax base in computing the capital gains tax/creditable withholding tax and documentary stamp tax on sale, exchange and other disposition of realties are those sales of realties effected through public bidding, where both the capital gains tax/creditable withholding tax and documentary stamp tax are computed based on the highest or winning bid price. (BIR Ruling No. 313-88 dated July 13, 1988) In BIR Ruling No. 150-98 dated October 19, 1998, this Office had the occasion to rule, viz. : "Such being the case, the non-use or non-application of the prescribed zonal valuation under special circumstance that adversely impacts the value or marketability of a property like in this case, a deviation from the general rule or guidelines on valuation of such property is always justified, otherwise, the imposition of an unjust or unreasonable tax or levy amounts to a confiscation of the property without due process and runs afoul of the equal protection clause of the Constitution. Hence, in this instant case, the use of assessed value or selling price (actual consideration), whichever is higher, in lieu of zonal value, is in order for being analogous to the exceptions recognized under RMO No. 41-91, BIR Ruling No. 144-96 dated December 24, 1996 and Reyes vs. Almanzor, 196 SCRA 332, 328-329 (1991)." Thus, the sale of realties in the instant case, having been effected through public bidding, the bid price rather than the zonal valuation established in the areas where the properties are located shall be used as tax base in computing the corresponding creditable withholding tax and documentary stamp tax under Section 196 of the Tax Code of 1997, as amended. In view of the foregoing, this Office hereby confirms your opinion that the sale of the Properties by Star Asset Management ROPOAS, Inc. through auction sale/public bidding in favor of Marina Seaview Development Corporation is subject to creditable withholding tax and documentary stamp, tax based on the highest or winning bid price. 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. TcIHDa Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service