Grant of Request to Pay Capital Gains Tax and for Waiver of Penalties and Surcharges

July 15, 1999 BIR RULING NO. 107-99 Sec. 248; 249-000-00-107-99 Mr. Antonio Te Jong Tian and Ms. Julie Grace E. Te Unit No. 401, Binondo Terrace Condominium II Alvarado Street, Binondo M a n i l a Sir/Madam : This refers to your letter dated May 28, 1999 requesting that you be allowed to pay the 6% capital gains tax and that penalties/surcharges for late payment of the capital gains tax on the sale of your principal residence situated at Binondo Terrace Condominium II, Alvarado Street, Binondo, Manila, be waived on the ground that the delay in the payment of the said tax was not intentional but was due to an honest belief that the regulation implementing Section 24(D)(2) of the Tax Code of 1997 exempting you from the payment thereof is enforceable. It is represented that you are the absolute owner of a residential property with an area of 128.23 sq. m. covered by CCT No. 15782 issued by the Registry of Deeds for the City of Manila and Tax Declaration no. 96-292-00577; that your sold said property to Wilson Ong Ng for and in consideration of the amount of P2,000,000.00 on February 10, 1999; that the proceeds of the sale will be utilized to acquire a new principal residence within eighteen (18) months from the date of the sale; that you applied for an exemption from the payment of capital gains tax on the sale of your principal residence under Section 24(D)(2) of the Tax Code of 1997; that subsequently you were issued by this Office a ruling stating, among other things, that in order for you to avail of the exemption from payment of capital gains tax on your principal residence, a surety bond from a reputable surety company should be filed; that when the availment of the said exemption under Section 24(D)(2) of the Tax Code of 1997 was suggested to you by your real estate broker, the latter assured you that you will be able to get a tax clearance within a month from filing; that it was only one the third week of April, 1999, that you were able to get hold of a ruling granting you tax exemption from payment of capital gains tax with an added requirement that you must secure a bond from a reputable surety company; that you and your broker tried to secure the required surety bond but most of the surety companies that your approached were asking for a 100% collateral; that inasmuch as you are having a hard time in securing a surety bond and that it will take you a couple of weeks to ask for a reconsideration removing the requirement of a surety bond, you decided to just pay the corresponding capital gains tax; that you have good intentions when you availed of the exemption and did not know that you will incur difficulty in its implementation; and that if you avail of this exemption and fail to fully utilize the proceeds of the sale, you will still be liable for deficiency capital gains tax without any surcharge and compromise penalty. In reply, please be informed that under Section 248(A)(1) and (3) and 249, both of the Tax Code of 1997, the imposition of the surcharge and interest on delinquency is mandatory. Strong reasons of policy support a strict observance of the rule regarding the payment of tax. The laws imposing penalties for delinquencies are clearly intended to hasten tax payments or punish evasions or neglect of duty in respect thereof. If delays in tax payments are to be condoned for light reasons, the law imposing penalties for delinquencies would be rendered nugatory and the maintenance of the government and its multifarious activities would be as precarious as taxpayers are willing or unwilling to pay their obligations to the state on time (Jamora vs. Meer, 74 Phils. 22). However, in view of exceptional circumstance which justifies your non-remittance of the subject national taxes on time, your request that you be allowed to pay the capital gains tax and for waiver of penalties/surcharges is hereby granted. 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, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue