Taxability of Sale of Real Property Where the Consideration is Less than P500,000

March 9, 1994 BIR RULING NO. 070-94 50 (b) 363-92 070-94 Doa Pepeng Realty, Inc. 159 J. Ruiz San Juan, Metro Manila Attention: Ms . Rosario de los Angeles Treasurer Gentlemen : This refers to your letter dated April 17, 1993 stating the Doa Pepeng Realty, Inc. is a domestic corporation engaged in the real estate business; that it is a member of the Creba in good standing; that your project, the Metro Montana Royale Phase II located in Bo. Burgos, Montalban, Rizal is registered with the Human Settlement Regulatory Commission (now HLURB) under P.D. 957 with Certificate of Registration No. 0759 and License to Sell No. 0736; that you have been selling for the past nine years subdivision lots mostly to low income buyers at a price ranging from P52,000.00 to P180,000.00 per lot on installment basis; and that the balance of the purchase price for each lot which is uncollected as of January 1, 1990 does not exceed P500,000. cdti In connection therewith, you now request for a ruling to the effect that your sale of real property where the consideration is less than P500,000 is exempt from the creditable withholding tax on sale, exchange or transfer of real property. In reply, please be informed that the rationale behind the modification of Revenue Memorandum Circular No. 7-90 by Revenue Memorandum Circular No. 16-90 is stated in Revenue Memorandum Circular No. 16-90 as follows: "Under said issuances (Revenue Regulations No. 1-90 as clarified by Revenue Memorandum Circular No. 7-90) the vendor of real property becomes entitled to zero (0%) percent only if the consideration for the sale of the lot or house and lot per transaction does not exceed P500,000.00 and he is registered with and certified to as engaged in low-cost housing projects under Batas Pambansa Blg. 220 (socialized housing law) by the Housing and Urban Development Coordinating Council (HUDCC) or the Housing and Land Use Regulatory Board (HLURB). And when the vendor's housing project is registered with the abovementioned government agency under Presidential Decree No. 957 (open market housing law), the transaction will be subject to either 2.5% or 5% withholding tax, notwithstanding the fact that the consideration is not more than P500,000.00." "In order to remove the bias against low-cost housing projects registered under P.D. 957 and to simplify tax administration, all sales, exchanges or transfers of real property on or after March 1, 1990 shall be subject to 0% percent, regardless of the law under which the project is registered, provided that the consideration does not exceed P500,000.00. In other words, it is the selling price or consideration (and not the law under which a project was approved) that determines whether or not a transaction is socialized/low cost in nature. This is also in conformity with the prevailing ceiling for low-income housing as set by government housing facilities like the Pag-ibig." Thus, to be entitled to the lower creditable withholding tax rate of 0%, the vendor realty corporation engaged in the development of subdivision housing projects and/or sale of a subdivision lot or house and lot must be certified to and registered with the HUDCC or HLURB either under B.P. 220 or P.D. 957 as engaged in, and licensed to sell low-cost housing projects for a consideration that does not exceed P500,000.00 per unit/transaction, which should be verified to be within such price range by the Revenue District Officer of the place where the property sold is located. Such being the case, inasmuch as the Doa Pepeng Realty Corporation has been registered with the Human Settlement Regulatory Commission (now HLURB) with Certificate of Registration No. 0759, in accordance with Section 5 of P.D. No. 957 the sale of low-cost housing units for a consideration which does not exceed P500,000.00 per unit/transaction shall be subject to 0% pursuant to Revenue Regulations No. 1-90 as clarified by Revenue Memorandum Circular Nos. 7-90 and 16-90. cdta Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue