Payment of Creditable Withholding Taxes and Documentary Stamp Taxes on Sale of Real Properties in Behalf of Buyers

September 5, 2000 BIR RULING NO. 034-00 RR8-98 000-00 Punongbayan & Araullo 6/F, Vernida IV Bldg. Alfaro St., Salcedo Village 1200 Makati City Attention: Atty . Vic C . Mamalateo Tax Partner Gentlemen : This refers to your letter dated April 29, 1999 requesting for a ruling on behalf of your client, Epoch Properties, Inc. (Epoch), that the payments made by Epoch of creditable withholding taxes (CWT) and documentary stamp taxes (DST) on its sales of real properties in behalf of its buyers as the latter's agent is in accordance with existing laws, rules and regulations. It is represented that Epoch is a stock corporation created in accordance with the Corporation Code of the Philippines and is engaged in the development and sale of real properties in the Philippines; that as part of its sale services to its buyers, Epoch undertook the processing of all ancillary transactions involved in the transfer and registration of real property as an agent of its buyers in order for the latter to secure a Tax Clearance Certificate (TCL) or a Certificate Authorizing Registration (CAR); that Epoch remits the CWT and DST to the government on behalf of its principal-buyers; and that under this practice, Epoch ensures the remittance of the tax due to the government and facilitates the transfer of the real properties in the name of the principal buyers. In reply, please be informed that pursuant to Section 4 of Revenue Regulations (RR) No. 8-98 amending Section 2.57.2(J) of RR 2-98, a creditable withholding tax based on the gross selling price/total amount of consideration or the fair market value determined in accordance with Section 6(E) of the Code, whichever is higher, paid to the seller/owner for the sale, transfer or exchange of real property, other than capital asset, shall be imposed upon the withholding agent/buyer, in accordance with the following schedule: A. Upon the following values of real property, where the seller/transferor is habitually engaged in the real estate business as per proof of registration with the HLURB or HUDCC: With a selling price of five thousand pesos (P500,000.00) or less 1.5% With a selling price of more than Five hundred thousand pesos (P500,000.00) but not more than Two million pesos (P2,000,000.00) 3.0% With a selling price of more than Two million pesos (P2,000,000.00) 5.0% B. Where the seller/transferor is not habitually engaged in the real estate business 7.5% C. Where the seller/transferor is exempt from creditable withholding tax in accordance with Section 2.57.2 of Revenue Regulations No. 2-98 Exempt Moreover, Section 2.57.3 of RR 2-98 provides for the following persons who are constituted as withholding agents for purposes of the creditable tax required to be withheld on income payments enumerated in Section 2.57.2, to wit: (A) In general, any juridical person, whether or not engaged in trade or business; (B) Any individual, with respect to payments made in connection with his trade or business. However, insofar as taxable sale, exchange or transfer of real property is concerned, individual buyers who are not engaged in trade, or business are also constituted as withholding agents; xxx xxx xxx" The obligation to deduct and withhold the creditable withholding tax is on the part of the buyer/payor, as the constituted withholding agent. There is, however, no prohibition for the buyer/payor to designate an agent to act for and in his behalf in the remittance of the said tax. In view thereof, the designation of Epoch as the agent of its buyers in the remittance of the creditable withholding tax and payment of the documentary stamp tax is valid as long as the remittance and payments were made in the name of the its buyers. Very truly yours, (SGD.) DAKILA B. FONACIER Commissioner of Internal Revenue