Kalakhan, Inc. is No Longer Liable to Pay for Any Deficiency Documentary Stamp Tax

October 20, 1997 BIR RULING NO. 109-97 196 100 (b) 000-00 109-97 Kalakhan, Inc. 25 Citibank Tower, Valero Cor. Villa Sts. Salcedo Village, Makati City Attention: Mr . Petronilo Q . Carreon President Gentlemen : This refers to your letter dated October 9, 1997 stating that last September 25, 1997, your company purchased five (5) office condominium units at the 11th Floor of Citibank Center located along Paseo de Roxas, Makati City from Philippine American Life Insurance Company (Philamlife) for and in consideration of P77,495,625.00; that thereafter, you paid the corresponding documentary stamp tax of P1,162,434.38 and remitted the required 7.5% creditable withholding tax of P5,812,171.88 to RDO No. 33 of Revenue Region No. 6 in Port Area, Manila because it has jurisdiction over the place of business of the seller; that ever since the date you paid the above taxes last September 25, 1997, the assigned examiner, Ms. Maria Dolores Matias and RDO Jaime Concepcion have not acted upon your request for the issuance of a Certificate Authorizing Registration (CAR); that after daily follow-ups, they verbally informed you that there was a deficiency in your payment of the documentary stamp tax; that according to them, a 1.5% documentary stamp tax should also be assessed on the 10% value-added tax of P7,749,562.50 which you have already paid; that you are argued that this is the first time that you will encounter that a 10% VAT is slapped a 1.5% documentary stamp tax; that nevertheless, you requested them to formalize the concern so that you can accordingly elevate the issue to the high authorities but both of them refused to do so up to the present (October 9, 1997); that you are of the opinion that RDO Jaime Concepcion and Revenue Examiner Ma. Dolores Matias have no legal basis on their theory about the slapping documentary stamps tax on the 10% VAT; that what they want to do so is charge a tax (DST) to another tax (10% VAT), something which may not have been contemplated even by the authors of the VAT Law; that other than this, they could not think anymore of any other issue against your application for a CAR; that every day of delay is a great loss on your part because you could not draw on your bank credit line; that your submission of the CCTs is a pre-requisite prior to the release of your loan; and that the zonal valuation of the condominium units sold is even lesser than the selling price of the condominium units as stated in the Deed of Absolute Sale dated September 25, 1997. aisadc Based on the foregoing representations and documents submitted, you are now requesting in effect for a ruling on the issue of your alleged deficiency documentary stamp tax relative to the 10% VAT on the said sale transaction and a directive from this office to compel RDO Jaime Concepcion and Revenue Examiner Ma. Dolores Matias to issue in your favor a Certificate Authorizing Registration (CAR) in order that the said sale transaction may be registered and the corresponding Condominium Certificate of Titles (CCTs) be issued in your name. In reply, please be informed that under Revenue Memorandum Order No. 41-91 dated November 11, 1991, in order to rationalize the computation of documentary stamp tax and to effect uniformity in all transactions involving the sale, exchange or any disposition of real property, the following guidelines, among others, were promulgated "In all cases involving sale, exchange, or any disposition of real property, the tax base for documentary stamp tax purposes shall be the same as the tax base used in the imposition of the capital gains tax (including the expanded creditable withholding tax prescribed under Revenue Regulations No. 6-85, as amended by Revenue Regulations No. 12-94, implementing Section 50(b) of the Tax Code, as amended, as clarified in Revenue Memorandum Circular No. 7-90 dated January 16, 1990) which means, gross selling price, fair market value or zonal value of the real property whichever is higher." Such being the case, and since the 1.5% documentary stamp tax on the aforesaid sale transaction was computed and paid based on the consideration or gross selling price of P77,495,625.50 exclusive of the passed on value-added tax (VAT), and considering further that it is shown on the sale document that the said consideration of P77,495,562.50 was segregated from the P7,749,562.50 passed on VAT, the said expanded creditable withholding tax and documentary stamp tax which you have already paid are not therefore, deficient, considering that in this case, the VAT does not form part of such consideration or gross selling price. Accordingly, this Office is of the opinion, as it hereby holds, that Kalakhan, Inc. is no longer liable to pay for any deficiency documentary stamp tax. This ruling shall serve as authority for the Revenue District Officer, Revenue District No. 33, Revenue Region No. 6, Port Area, Manila to issue the corresponding Tax Clearance Certificate (TCL) or Certificate Authorizing Registration (CAR) as the case may be, in favor of Kalakhan, Inc . 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, this ruling shall be considered null and void. Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue