Compliance with Revenue Regulations No. 6-85

July 24, 1996 BIR RULING NO. 079-96 50 (b) 000-00 79-96 Telectronic Systems Incorporated Retelco Village, Pasig City Attention: Mr . Edmund C . Fradejas Vice-President Comptroller Gentlemen : This refers to your letter dated May 30, 1996 stating that a Deed of Absolute Sale involving a real estate was executed on December 29, 1995 between Telectronic Systems Incorporated (TSI), as the vendee and Waterous Medical Corporation (WMC), as the vendor, for and in consideration of P44,772,000.00; that said amount is payable by TSI within one year from the date of the signing of the said deed with interest of 14% per annum until fully paid; that this amount has not yet been fully paid by TSI as it has a one year period to do so; that the parties are now working for the transfer of the title to the said real estate in the name of the vendee; that pursuant to Revenue Regulations No. 12-94 implementing Section 50(b) of the Tax Code, as amended, the sale, exchange or transfer of real property whether held as capital or ordinary asset by WMC is subject to the 7.5% expanded withholding tax or a total amount of P3,357,900.00; that WMC has reported in its books as the income derived from the sale of its property, the amount of P41,094,395.00 for the taxable year 1995 and for which the income tax is being paid in six (6) monthly installments starting April 15, 1996; and that as of May 30, 1996, the total income tax payments made by WMC amounted to P7,702,815.88 which amount is more than the 7.5% expanded withholding tax supposedly to be withheld by TSI pursuant to Revenue Regulations No. 12-94. LLpr Based on the foregoing representatives, you are now requesting confirmation of your opinion that the reported income of WMC in the total amount of P41,094,395.00 from the sale of its real property of which the amount of P7,702,815.88 has been paid as income tax which is more than 7.5% of the amount required to be withheld or P3,357,99.00, be deemed substantial compliance with the withholding tax requirements and that the subsequent issuance of the Certificate Authorizing Registration (CAR) by the RDO, is proper. In reply, please be informed that since the gain to be realized by WMC from the said sale has already been reflected in its income tax return in the year of sale and the amount of P7,702,815.88 already paid which is more than 7.5% creditable income tax to be withheld, this Office is of the opinion as it hereby holds, that there is substantial compliance with Revenue Regulations No. 6-85, as amended by Revenue Regulations No. 12-94 implementing Section 50 (b) of the Tax Code, as amended. Such being the case, the RDO can now issue the corresponding Certificate Authorizing Registration (CAR) without requiring the payment of the creditable withholding tax by the buyer. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue