Tax Liability of an Entity Engaged in Real Estate Business

May 28, 1990 BIR RULING NO. 092-90 50 (b) 052-90 092-90 Gentlemen : This refers to your letter dated March 5, 1990 stating that you are an entity engaged in real estate business; that sometime last year between January to September 1989, you sold one hundred thirty-five (135) houses and lot packages of your BPI Real Estate Project located at the Ayala Alabang Village Phase VII in Muntinlupa; that said sales were documented by a Contract to Purchase and To Sell which was notarized also between January to September of last year; that all of the units sold paid the 30% down payment within 1989 and, on this basis, you have declared said sales in your 1989 Quarterly Corporate Income Tax Return; that you have so far filed your income tax returns up to the 3rd Quarter while the final return is being prepared for filing by the end of this month; that most of the said units sold have likewise been fully paid last year; that both the full payment and the 30% down payment are evidenced by your official receipts on file; that for various reasons like delays in the submission of the deed of sale by the buyers and other pertinent documents like the power of attorney, you were unable to register the sale of thirty (30) units in 1989; that it is your understanding that you can be exempted from paying the creditable withholding tax if you can prove through the submission to the Revenue District Officer copies of the Contract to Sell, Official Receipts of payments and your income tax returns that the said sales occurred in 1989 and that you have judiciously paid your corporate income tax; and that your reasoning is based on page 3, paragraph 2 of Revenue Memorandum Circular No. 7-90 which states that Revenue District Officer may issue the Certificate Authorizing Registration (CAR) without the payment of the CWT where the taxpayer can clearly prove that "THE CONTRACT TO SELL SHOWS THE LAST INSTALLMENT TO HAVE BEEN PAID ON OR BEFORE NOVEMBER 1989." Based on the foregoing representations, you now request in effect a ruling exempting you from the payment of the creditable withholding tax imposed under Revenue Regulations No. 12-89 as amended by Revenue Regulations No. 1-90 on the aforementioned sale of 135 house and lot packages of your BPI Real Estate Project at the Ayala Alabang Village Phase VII in Muntinlupa, particularly the sale of the 30 units thereof, which you were unable to register in 1989. In reply, please be informed that pursuant to Revenue Memorandum Circular No. 7-90 clarifying Revenue Regulations No. 12-89 and 1-90 prescribing the withholding of creditable income tax on sale, exchange or transfer of real property, the obligation of the payor to deduct and withhold arises at the time the consideration is paid or payable (par. 4, RMC 7-90). In the case of installment sales (whereof it could be inferred that sale on a deferred payment basis is likewise embraced within the meaning of the said term as manifested from the use of the term and in the context in which it was used), only such amounts paid beginning in January, 1990 shall be subject to withholding. Accordingly, in the instant case, since the last payments on the aforementioned sale transactions were paid prior to January, 1990, as shown by documentary evidence submitted, and the Deeds of Sale executed after January, 1990, the effective date of Revenue Regulations No. 12-89, on each of the unit sold of the 30 units which you were unable to register due to circumstances beyond your control, were intended merely to evidence transfer of an already paid up real property, the withholding requirement under Revenue Regulations Nos. 12-89 and 1-90 will not apply. (BIR Ruling No. 052-90 dated April 5, 1990). Moreover, pursuant to Section 196 of the Tax Code, the documentary stamp tax on said sale transactions shall be paid based on the amount appearing on the deed of absolute sale executed on each unit sold regardless of whether the deed was executed prior to or after January, 1990. This serves as an authority for the Revenue District Officer concerned to issue the Certificate of Registration (CAR) on said sale transaction without the payment of the creditable withholding tax by the taxpayer. This ruling is being issued based on the facts represented and on the documentary evidence submitted. If upon investigation, it is found out that the facts are different and the documentary evidence submitted in support thereof were fabricated, this ruling shall be considered as automatically revoked as of the date of its issuance. aisadc Very truly yours, (SGD.) JOSE U. ONG Commissioner