Whether Honeycomb Builders Incorporated Should be Subject to Zero (0%) Percent on Sales Not Exceeding P500,000.00

April 1, 1992 BIR RULING NO. 107-92 50 (b) 008-91 107-92 Honeycomb Builders Incorporated 49 Libertad St., Mandaluyong Metro Manila Attention: Mr . Reynaldo S . Guevarra President Gentlemen : This refers to your letter dated January 20, 1992 stating that your company is engaged in the construction of low-cost housing units, be it condominiums or townhouses covered by BP 220 or PD 957; that you are a member of CREBA in good standing; that your project at Gueventville-2 located at M. Cruz near Libertad St., Mandaluyong, Metro Manila was duly covered by necessary Development Permit in conformity with PD 957; that your project is also covered by a Certificate of Registration from the Housing and Land Use Regulatory Board (HLURB); that you cater principally to low income earners and PAG-IBIG members; that your normal selling price ranges from P180,000 to less than P500,000 as evidenced by your Contract to Sell or Deed of Sale with your various customers; that your abovementioned project suffered some delay in the release of title although majority of your customers have already fully paid; that the non-release of the title was due to a case in court wherein the original land owner Guevent Industrial Development (GIDC) could not obtain the release of the title to the property which it previously mortgaged to State Investment House, Inc. (SIHI) despite of tender of full payment of its obligation because the period of redemption had already prescribed; that eventually the court, after a long court battle, decided in favor of GIDC; that on September 4, 1991, the original owner was issued a Deed of Release by SIHI pursuant to a court order; and that as a result, you were able to obtain the title to the property. Based on the foregoing representations you now request a ruling on the following: "1. That we should be subject to zero (0%) percent on sales not exceeding P500,000.00 despite the delay on the actual execution of the Deed of Sale. "2. That Zonal valuation is not applicable to us precisely our project is registered low cost housing project under P.D. No. 957. "3. That suffered delay in the execution of Deed of Sale should not affect our registration under P.D. 957 and the revised Zonal valuation, if any, should not be made applicable to us. In reply, please be informed that under paragraph nos. 2 and 3 Revenue Memorandum Circular No. 7-90 as amended by Revenue Memorandum Circular No. 16-90 clarifying some pertinent provisions of Revenue Regulations No. 12-89 as amended by Revenue Regulations No. 1-90 implementing Section 50(b) of the Tax Code, as amended, in order to remove the bias against low-cost housing projects registered under PD No. 957 and to simplify tax administration, all sales, exchanges or transfers of real property on or after March 1, 1990 shall be subject to zero (0%) percent, regardless of the law under which a project is registered, provided that the consideration does not exceed P500,000. 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 transactions is socialized/low cost in nature. Moreover, to be entitled to the lower withholding tax rate of 0%, the presentation of the Certificate of Registration and License To Sell for a subdivision or condominium project issued by the Housing and Land Use Regulatory Board (HLURB) shall be sufficient proof for purposes of the required Housing and Urban Development Coordinating Council (HUDCC)/HLURB Certification in the regulations (Revenue Regulations No. 12-89 as amended by Revenue Regulations No. 1-90). Such being the case, and since your residential condominium project within RSG Urbanhomes, Gueventville II Phase I consisting of 82 units situated at Libertad St., Mandaluyong, Metro Manila is registered with the Housing and Land Use Regulatory Board under Certificate of Registration No. 88-07-806 and was issued with the corresponding License to Sell under License to Sell No. 88-07-827 coupled with the sale thereof ranging from P180,000 to less than P500,000 per unit, this Office is therefore, of the opinion as it hereby holds that your sale of your residential condominium project within RSG Urbanhomes, Gueventville II Phase I situated at Libertad St., Mandaluyong, Metro Manila, that are within the range of P180,000 to less than P500,000 is subject to the 0% creditable withholding tax imposed under Revenue Regulations No. 1-90 implementing section 50(b) of the Tax Code, despite the delay in the actual execution of the Deed of Sale. Hence, rendering inapplicable the use of the zonal valuation as well as the revised zonal valuation of your said project as tax base in computing the creditable withholding tax on your sale thereof. Furthermore, the suffered delay in the execution of the Deed of Sale on your sale of your said project did not affect your registration under P.D. No. 957. Very truly yours, JOSE U. ONG Commissioner of Internal Revenue