Sale of Condominium Units Subject to 5% Creditable Withholding Tax and Documentary Stamp Tax

February 19, 1999 BIR RULING NO. 019-99 000-00-019-99 Mr. Napoleon G. Rama P.O. Box 769 Manila Bulletin Building Muralla corner Recoletos Street Intramuros, Manila S i r : This refers to your letters dated November 21, 1996 and May 1, 1997 which were referred to this Office by the Chief, Appellate Division by way of 1 st Indorsement dated July 1, 1998 requesting for a ruling as to whether or not the sale of a condominium unit by Bagong Lipunan Community Association of Valle Verde and Valle Verde I (BLCA) Condominium Corporation (Seller) to Ms. Liza Rama-Esposo, is subject to the 5% creditable withholding tax and to the corresponding documentary stamp tax. It is represented that the Seller is a domestic corporation duly registered with the Securities and Exchange Commission (SEC) represented by the National Home Mortgage Finance Corporation (NHMFC) as certified to by Atty. Antonio N. de los Reyes dated April 25, 1997; that the Seller is the owner of a condominium unit at Valle Verde I (BLCA) Condominium Corporation located at Bo. Ugong, Pasig City, covered by CCT No. 8787 of the Registry of Deeds for Pasig City with a zonal value of P2,012,400.00; that on October 28, 1996, a Deed of Sale was executed in favor of Ms. Liza Rama-Esposo covering the above-mentioned property; that in the said Deed, it was agreed that the buyer shall be responsible for the payment of all taxes, assessments, fines or penalties accruing thereto or connected therewith or assessed against the above-described property from the quarter following the occupancy of the unit; that the documentary stamps, registration fees, transfer taxes and all other expenses incident to/or necessary for the transfer of the title of the unit to the buyer shall be for the sole and exclusive account of the latter; that since Liza Rama-Esposo was in a hurry to get the Certificate Authorizing Registration (CAR), she paid under protest the withholding tax in the amount of P100,620.00 as evidenced by the Official Receipt No. BCS-96-01840 dated October 29, 1996 and the documentary stamp tax in the amount of P30,195.00 as evidenced by the ATAP4066056 dated October 29, 1996, to which Revenue District Office No. 43, Pasig City issued in favor of Ms. Liza Rama-Esposo the corresponding CAR; and that you alleged that the said tax was mistakenly imposed on her since Ms. Liza Rama-Esposo was not the seller of the said property but the buyer. In reply, please be informed that pursuant to Section 1(j)(3) of Revenue Regulations No. 12-94, as amended provides that the sale, exchange or transfer of real property, other than capital asset, by an individual, estate, trust, trust fund or pension fund or real property, whether held as capital or ordinary asset, by a corporation (a) not registered with the HLURB as engaged in Socialized Housing projects under R.A. No. 7279; (b) the selling price thereof is over P2,000,000.00; and (c) the seller/transferor is habitually engaged in the real estate business shall be subject to the 5% creditable withholding tax based on the gross selling price or total amount of consideration or its equivalent paid to the seller/owner. Such being the case, since the seller, Bagong Lipunan Community Association of Valle Verde and Valle Verde I (BLCA) Condominium Corporation is not registered with the HLURB as engaged in the socialized housing projects under R.A. No. 7279 but is engaged in the real estate business with a selling price of more than P2,000,000.00 per unit, the said sale shall be subject to the 5% creditable withholding tax imposed under said Regulations. Consequently, Ms. Liza Rama-Esposo is hereby constituted as withholding agent and is required to withhold the 5% creditable withholding tax based on the gross selling price, or total amount of consideration or its equivalent paid to Bagong Lipunan Community Association of Valle Verde and Valle Verde I (BLCA) Condominium Corporation. On the other hand, Section 2 of Revenue Regulations No. 9-94 pertinent portion of which reads: "SEC. 2. Persons Liable . Upon documents, instruments, loan, agreements, and papers and upon acceptances, assignments, sales and transfers of the obligation, right or property incident thereto, documentary stamp taxes for and in respect of the transaction so had or accomplished shall be paid as hereinafter prescribed by the person making, signing, issuing, accepting, or transferring the same, wherever the document is made, signed, issued, accepted, or transferred . . ., and at the same time such act is done or transaction had: . . ." Considering that in the Deed of Sale, the parties agreed that the documentary stamps, registration fees, transfer taxes and all other expenses incident to/or necessary for the transfer of the title of the unit to the buyer shall be for the sole and exclusive account of the latter, and such stipulation is not contrary to law, morals, good customs, public order or public policy, Ms. Liza Rama-Esposo shall be liable for the payment of the corresponding documentary stamp tax imposed under Section 196 of the Tax Code, as amended [also Section 196 of the Tax Code of 1997]. In view of the foregoing, this Office regrets to inform you that your request for refund of the amount of P130,815.00 representing the creditable withholding tax and the corresponding documentary stamp tax as erroneously paid by Ms. Liza Rama-Esposo cannot be granted for lack of legal basis. Very truly yours, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue