Request for Reconsideration on Proposed Assessment for Capital Gains Tax on Sale of Realty

September 11, 2000 BIR RULING NO. 037-00 248 (A) (2) 000-00 Loxon Philippines, Inc. 3/F Dolmar Building 56 EDSA, Mandaluyong City Attention: Ms. R.A. Montessa Manager, Accounting Department Gentlemen : This refers to your letter dated October 22, 1999 which the Regional Director of Revenue Region No. 7, Quezon City referred to this Office for appropriate action relative to your request for a reconsideration on the proposed assessment against you for capital gains tax on the sale of your realty located in Greenhills, San Juan, Metro Manila, at the Revenue District Office in Mandaluyong City. Documents submitted show that you are the registered owner of a studio-type condominium unit situated at 19C, 19th Floor of the Eisenhower Condominium Building containing an area of 38.81 square meters covered by Condominium Certificate of Title No. 5797-R issued by the Registry of Deeds of San Juan, Metro Manila and a parking slot situated at B1-85, Basement 1 of the Eisenhower Condominium containing an area of 12.5 square meters covered by Condominium Certificate of Title No. 7434-R issued by the Registry of Deeds of San Juan, Metro Manila; that you sold the above realty to Ms. Evelyn C. Esmerio for and in consideration of One Million Five Hundred Fifty Two Thousand Four Hundred Pesos (P1,552,400.00) for the Condominium Unit and Five Hundred Thousand Pesos (P500,000.00) for the parking slot; that when you approached one of the Revenue Supervisors at the Revenue District Office in Mandaluyong City relative to your payment of the capital gains tax and documentary stamp tax due on said sale transaction, they prepared a computation of said taxes and forms were accomplished, after which, you were directed to pay the same in an accredited bank in Mandaluyong City; that when you inquired for the Certificate for the taxes paid as a requirement in subsequent transfer of title to the realty, you were informed by the BIR Mandaluyong City Office that you should get the same from the BIR San Juan Office since the property sold is located in San Juan, Metro Manila; that as a consequence, you were issued the aforesaid proposed assessment equivalent to 25% of the capital gains tax you paid. In reply, please be informed that under Revenue Memorandum Order No. 68-99 dated August 9, 1999, under the heading Policies and Guidelines F(3) and F(4): DAEaTS "3. For Transfer of Real Property Subject to Capital Gains Tax 3.1 For sale/transfer of real property, the capital gains tax return shall be filed by the seller/transferor with the AAB, RCO or DMT and processed within the RDO having jurisdiction over the place where the property being transferred is located. 4. For Transfer of Property Subject to Creditable Withholding Tax 4.1 In case of sale of real property and notwithstanding the provision under Section 258 (A)(1) of Revenue Regulations No. 7-99 the creditable withholding tax return shall be filed by the withholding agent/buyer with AAB, RCO or DMT and processed within the RDO having jurisdiction over the place where the property being transferred is located." In this connection, Section 248(A)(2) provides that there shall be imposed, in addition to the tax required to be paid, a penalty equivalent to Twenty-Five percent (25%) of the amount due, in case a return required to be filed under the Tax Code of 1997, unless otherwise authorized by the Commissioner, is filed with an internal revenue officer other than those with whom the return is required to be filed. In the instant case, it appears from the foregoing that you are liable to pay the 25% surcharge for filing a return other than those with whom the return is required to be filed or in other words, you filed the capital gains tax return/creditable, withholding tax return in the Revenue District Office in Mandaluyong instead of filing the same with the Revenue District Office in San Juan, Metro Manila where the property sold is located. However, since your filing of the return and payment of the said taxes (capital gains tax and documentary stamp tax) on the sale of your realty situated in San Juan, Metro Manila, was prompted by and with the guidance of the BIR office in Mandaluyong City when you inquired about the payment of said taxes, this Office is of the belief and so holds that the above circumstances may be considered as justifiable reasons in waiving the said 25% surcharge imposed under Section 248(A)(2) of the Tax Code of 1997. Accordingly, you are not liable to pay the aforesaid proposed assessment. CcHDSA Very truly yours, (SGD.) DAKILA B. FONACIER Commissioner of Internal Revenue