Application of BIR Ruling No. 019-96

July 11, 1996 BIR RULING NO. 076-96 246 000-00 076-96 E. L. Punsalan and Associates Suite 206 Ferros Building No. 176, Salcedo Street Legaspi Village Makati City Attention: Mr . Eranio L . Punsalan Gentlemen : This refers to your letter dated May 28, 1996 requesting clarification on the following: aisadc "1. That since our clients, in good faith, followed the dictates of the provisions of the BIR Ruling 78-94, dated March 18, 1994, signed by the Honorable Commissioner herself, and Regional Revenue Memorandum Order No. 7-94, dated December 15, 1994, signed by Director Antonio Ortega, may we be advised as to the correctness of our opinion that Revenue Memorandum Circular No. 30-96 dated January 4, 1996 has a prospective and not a retroactive effect. Thus, transactions entered into and perfected before its issuance and effectivity, in 1995 and prior years, are covered by the then applicable and subsisting BIR Ruling No. 78-95 and Revenue Memorandum Order No. 7-94; "2. That, the real property buyer or his representative, who is the withholding agent, shall withhold and remit to the Bureau of Internal Revenue the hundred percent Expanded Withholding Tax on the Gross Selling Price (GSP), as evidenced by the instrument of sale, though such payment is still, provided the initial payment exceeds 25% of the GSP" In reply thereto, please be informed as follows: (1) That any revocation, modification, or reversal of any of the rules and regulations promulgated for the effective enforcement of the provisions of the Tax Code, or any of the ruling or circulars promulgated by the Commissioner shall not be given retroactive application if the revocation, modification, or reversal will be prejudicial to the taxpayers, except in the following cases: (a) where the taxpayer deliberately misstates or omits material facts from his return or any document required of him by the Bureau of Internal Revenue; (b) where the facts subsequently gathered by the Bureau of Internal Revenue are materially different from the facts on which the ruling is based; or (c) where the taxpayer acted in bad faith (Sec. 246 Tax Code, as amended) As represented, your clients, in good faith made their income tax payments on their sale transactions in 1995 and prior years still based on BIR Ruling No. 78-94 dated march 18, 1994 and Regional Revenue Memorandum Order No. 7-94 dated December 15, 1994 signed by Regional Director Antonio Ortega. Such being the case, and since the modification of BIR Ruling No. 078-94 dated March 18, 1994 by BIR Ruling No. 019-96 dated February 20, 1996 insofar as the withholding tax payments under RR 1-90 as amended by RR 12-94 on the sale of condominium units on a deferred payment basis are concerned, which should be on the entire selling price of the condominium units and not only on the initial or downpayments if the initial or downpayments during the year of sale exceed twenty five percent (25%) of the selling price would indeed be prejudicial to your clients with respect to their transactions entered into and perfected before the issuance and effectivity of the aforesaid modificatory ruling, then BIR Ruling No. 019-96 supra shall not be given retroactive application. (ABS-CBN Broadcasting Corporation vs. Court of Tax Appeals, et. al., 108 SCRA, p. 143; CIR vs. Burroughs Limited and CTA, L-66653, June 19, 1986) In other words, in the absence of any of the above-enumerated exceptions (Sec. 246, Tax Code), BIR Ruling No. 019-96 dated February 20, 1996 as published by Revenue Memorandum Circular No. 30-96 January 4, 1996 shall have prospective application; hence, it shall only apply to transactions effected on or after February 20, 1996. (2) Your question No. 2 is answered in the affirmative. Even if the payment is still partial, provided that the initial or downpayments during the year of the sale of real property exceed twenty-five (25%) of the entire selling price such that the sale is considered a cash sale, the real property buyer or his representative, who is the withholding agent for this purpose, shall withhold and remit to the Bureau of Internal Revenue the withholding tax payments under RR 1-90 as amended by RR 12-94 which should not only be on the basis of the initial or downpayments on the said sale of real property but on its entire selling price. (BIR Ruling No. 019-96; RMC 30-96 supra ) Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue