Exemption Granted to PNR

June 7, 1990 BIR RULING NO. 114-90 50 (b) 000-00 114-90 Gentlemen : This refers to your letter dated April 6, 1990 stating that your Company purchased from the Philippine National Railways (PNR) its Lot No. 1 located in Baguio City; that the Deed of Sale relative to said purchase was executed on January 19, 1990; that you were assured by PNR that it is exempt from the payment of all taxes under its corporate Charter; and that, transfer of title over said property to you could not be effected because this Office thru its District Office in Baguio City refused to issue a tax clearance alleging that PNR is no longer exempt from taxation, the exemption having been lifted by President Aquino. Based on the foregoing representations, you now in effect request a ruling as to whether or not PNR is still a tax-exempt corporation; and in the negative, whether or not the aforementioned transaction is covered by the new withholding tax regulation or Revenue Regulations No. 12-89. In reply, please be informed that Executive Order No. 93, which took effect on March 10, 1987, withdrew all tax and duty exemption privileges granted and being enjoyed by all private and government entities which necessarily include the privilege from being exempt from all taxes granted in favor of the PNR under its charter. Accordingly, the tax-exemption privileges of PNR under its Charter had been withdrawn by E.O. No. 93 as of March 10, 1987, and therefore, as of said date it is no longer a tax-exempt corporation. Accordingly, the aforesaid sale of PNR of its Lot No. 1 situated at Baguio City in your favor is subject to the 10% creditable withholding tax imposed under Revenue Regulations No. 12-89 which took effect on January 1, 1990 or prior to its amendment by Revenue Regulations No. 1-90, based on the gross selling price or the total amount of money or its equivalent which the purchaser pays to the vendor, if the date of presentation of the notarized Deed of Sale with the BIR Office, Baguio City, was made prior to February 1, 1990, the effectivity of Revenue Regulations No. 1-90, even though the amount of the tax is paid on or after February 1, 1990. This is so since under No. 3 of Revenue Memorandum Circular No. 7-90 clarifying some pertinent provisions of the aforesaid regulations, dated January 16, 1990, in order to simplify tax administration, the reduced rates in RR 1-90 may be withheld and paid by the withholding agent on real estate transactions consummated before February 1, 1990, if the sales document is presented to the BIR on or after February 1, 1990. In other words, beginning February 1, 1990, the test to be used for purposes of determining whether the transaction is subject to the old or new withholding tax rates is the date of receipt or presentation of the Deed of Sale to the BIR. Since the BIR does not want to refund taxes already paid by taxpayer on prior transactions at the higher rates, and in order to be fair to those who have paid at the old rates, the date of presentation of the Deed of Sale shall be reckoned as the date of the transaction for purposes of securing the Certificate of Registration (CAR); thus, if the Deed of Sale was notarized on January 5, 1990 and presented to the BIR on January 15, 1990, the rate of withholding tax prescribed in RR 12-89 shall still be applied thereto, even though the amount of tax was paid in February, 1990. cdtech Very truly yours, (SGD.) JOSE U. ONG Commissioner