Creditable Withholding Tax at 5% on the Sale of Acquired Assets of a Bank

May 10, 1990 BIR RULING NO. 070-90 50 (b) 000-00 070-90 S i r : This refers to your letter dated February 14, 1990 requesting a ruling as to how the acquired assets of a bank should be classified for purposes of determining whether or not the sale thereof is covered by the expanded withholding tax pursuant to Revenue Regulations No. 6-85, as amended by Revenue Regulations Nos. 12-89 and 1-90. cdtech In reply, please be informed that whereas Revenue Regulations No. 12-89 which amended Revenue Regulations No. 6-85, extended the coverage of the expanded withholding tax to sales or exchanges or real property other than capital assets by a corporation ; Revenue Regulations No. 1-90, which further amended the aforesaid regulations, extended the scope of the expanded withholding tax to all sales of real property , whether capital or ordinary asset, by a corporation who is not habitually engaged in real estate business as indicated in Section 1 of Revenue Regulations No. 6-85, as amended by Revenue Regulations No. 1-90, reading: "Sec. 1. Income Payments Subject to Creditable Withholding Tax and Rates Prescribed Thereon . Except as herein otherwise provided, there shall be withheld a creditable income tax at the rates herein specified for each class of payee from the following items of income payments to persons residing in the Philippines: "(j) Gross selling price or total amount of consideration or its equivalent paid to the seller/owner for the sale, exchange or transfer of "(i) . . . "(ii) . . . "(iii) real property, other than capital assets, by an individual, estate, trust, trust fund or pension fund or real property, whether capital or ordinary asset, by a corporation who is not habitually engaged in real estate business five percent (5%)." Based on the foregoing, since acquired assets of the bank are capital assets, the sale thereof (by the bank) is subject to the creditable withholding tax at 5%. (Answer to Q.1, Primer on Rev. Regs. No. 12-89 and RMC No. 80-89, as amended by Rev. Reg. No. 1-90 and RMC No. 7-90) cdtech Very truly yours, (SGD.) JOSE U. ONG Commissioner