Request for Exemption from Creditable Expanded Withholding Tax of the Deed of Assignment (by way of Dation in Payment)

May 23, 1996 BIR RULING NO. 062-96 24 (a); 50 (b) 000-00 062-96 Mr. David S. Turiano 50 San Francisco Iriga City S i r : This refers to your letter dated September 29, 1995 requesting for exemption from the creditable expanded withholding tax of the Deed of Assignment (by way of Dation in Payment) entered into by and between the Fieldview Realty Development Corporation (Fieldview) and the Bicol Business Services, Inc. (Bicol) on June 10, 1984; and of the Deed of Absolute Sale executed by Bicol in your favor on June 30, 1994. It appears that Fieldview was indebted to Bicol in the amount of Ninety Thousand Pesos (P90,000.00); that to settle the said indebtedness, a Deed of Assignment by way of Dation in Payment was entered into on June 10, 1984 by and between Fieldview and Bicol, where Fieldview, as the registered owner, transferred and conveyed to Bicol ten (10) lots together with the improvements thereon, situated in Anayan, Pili, Camarines Sur, and covered by the following Transfer Certificates of Title of the Register of Deeds of Camarines Sur, viz: TCT No. AREA (sq. m.) 6965 375 6966 337 7005 499 7004 502 7003 505 7002 508 7001 511 6999 422 7000 426 that as per mutual agreement of the parties, the said properties should be redeemed within five (5) years counted from the execution of the said Deed of Assignment; and that since the five (5)-year period of redemption had already expired, Bicol executed a Deed of Absolute Sale on June 30, 1994 and sold nine (9) of the ten (10) lots covered by the said Deed of Assignment (via Dation in Payment) to you for a package price of One Hundred Seventy Six Thousand Pesos (P176,000.00) In reply, please be informed that Revenue Regulations No. 12-89, amending Revenue Regulations No. 6-85 and implementing Section 50(b) of the Tax Code, as amended, extended the coverage of the creditable expanded withholding tax to sales, transfers or exchanges of real property consummated on or after January 1, 1990. Pursuant to Revenue Regulations No. 12-89, as amended by Revenue Regulations No. 1-90 dated January 16, 1990 implementing Section 50(b) of the Tax Code as amended, all sales, exchanges or transfers of real property (whether classified as ordinary or capital asset) by corporations consummated on or after January 1, 1990 are subject to the creditable expanded withholding tax (RMC No. 7-90 dated January 6, 1990) Accordingly, since revenue regulations shall apply prospectively, any transfer or conveyance of real property in accordance with the Deed of Assignment (by way of Dation in Payment) executed on June 10, 1984 is not subject to the creditable expanded withholding tax prescribed by Revenue Regulations No. 1-89, as amended by Revenue Regulations No. 1-90. cdtech However, any income or gain realized on the abovementioned transaction shall be subject to the 35% corporate income tax imposed under Section 24(a) of the Tax Code, as amended, and to the documentary stamp tax at the rates applicable under Section 196 of the Tax Code as amended, prior to its amendment by Republic Act No. 7660. On the other hand, Bicol shall be subject to the creditable expanded withholding tax of 5% prescribed by Revenue Regulations No. 1-90 (before its amendment by Revenue Regulations No. 12-94 effective July 16, 1994) on its sale of the nine (9) lots to you by virtue of the Deed of Absolute Sale executed on June 30, 1994. The said 5% expanded withholding tax shall be creditable against the regular corporate income tax due from Bicol during the quarter when the sale of the nine (9) lots to you was made and consummated. This ruling shall serve as an authority for the Revenue District Officer of Revenue District No. 65, Naga City to issue the corresponding Certificate Authorizing Registration (CAR) on said transactions, but only after the corresponding taxes and penalties shall have been paid. This ruling is issued on the basis of the foregoing representations. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. cd Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue