Exemption from Creditable Withholding Tax - Sale of Certain Real Properties

March 30, 1990 BIR RULING NO. 048-90 50 (b) 000-00 048-90 Gentlemen : This refers to your letter dated January 22, 1990 requesting confirmation of your opinion that the sale by Strategic Investment Development Corporation of three (3) parcels of land to your client, CCT Construction Corporation is not subject to the expanded withholding tax under Revenue Regulations No. 12-89 which took effect on January 1, 1990. It is represented that on November 3, 1989, Strategic Investment and Development Corporation, a government-owned and controlled corporation, held a competitive bidding for the sale of the following industrial lots located at People's Technology Terminal Complex, Carmona, Cavite, for which your client was declared as the winning bidder: TCT No. Lot Area Amount 159972 7,430 sq. m. P3,907,072.00 159970 10,000 sq. m. 5,120,000.00 159973 10,220 sq. m. 5,232,640.00 ___________ P14,259,712.00 =========== that under Item (G) of the Instruction to Bidders, winning bidders were required to pay the balance of the purchase price within five (5) working days from receipt or tender of the Notice of Awards; the failure to do so will mean cancellation of the award and forfeiture of the deposit or bid bond; that pursuant thereto, your client paid the total purchase price as follows: Provisional Amount Receipt No. Date Check No. Date P 512,000.00 02151 11-03-89 045408 11-03-89 573,264.00 02152 11-03-89 043410 11-03-89 390,707.20 02150 11-03-89 045407 11-03-89 12,513,126.40 02180 12-21-89 059798 12-20-89 320,614.40 02181 17-21-89 045409 11-03-89 that your client had duly paid the total bid price as of December 20, 1989; that the corresponding Deeds of Absolute Sale were executed only on January 5, 1990; and that considering that the total purchase price of the aforesaid properties were fully paid prior to the effectivity of Revenue Regulations No. 12-89, you are of the opinion that the sale of the aforementioned properties are not covered by Revenue Regulations No. 12-89. In reply thereto, I have the honor to inform you that all sales, exchanges or transfers of real properties (whether classified or ordinary or capital asset) by corporations, consummated on or after January 1, 1990, are subject to the creditable withholding tax. However, in the case of individuals, estates, trusts, trust funds or pension funds only sales, exchanges or transfers of real properties classified as ordinary assets, consummated on or after January 1, 1990 are subject to the creditable withholding tax. Moreover, the date of notarization appearing on the Deed of Sale shall be considered prima facie the date of consummation of the contract of sale (RNC No. 7-90) Although the Deed of Absolute Sale in this case was notarized on January 5, 1990, or after the effectivity of Revenue Regulations No. 12-89, nevertheless since your client has already paid the total purchase price (bid price) as of December 20, 1989, because under Item (G) of the Instruction to Bidders, winning bidders were required to pay the balance of the purchase price within five (5) working days from receipt or tender of the Notice of Awards and that failure to do so will mean cancellation of the award and forfeiture of the deposit or bid bond, there is therefore nothing from which CCT Construction Corporation can withhold the 10% creditable withholding tax under Revenue Regulations No. 12-89 (before its amendment by Revenue Regulations No. 1-90) when the Deed of Absolute Sale was executed on January 5, 1990. In view thereof, the sale by Strategic Investment Development Corporation of its three (3) parcels of land in favor of your client, CCT Construction Corporation is not subject to the 10% creditable withholding tax under Revenue Regulations No. 12-89. aisadc Very truly yours, (SGD.) JOSE U. ONG Commissioner