Payments for Housing Loans Tendered to the GSIS, effective January 1990 Not Subject to the 5% Expanded Withholding Tax

July 18, 1994 BIR RULING NO. 117-94 50 (b) 000-00 117-94 Ms. Elvessa P. Apolinario Block 51, Lot 44, Lagro Subdivision Novaliches, Quezon City M a d a m : This refers to your letters dated June 9, 1994 and July 12, 1994 requesting a ruling as to whether monthly installment payments for housing loans tendered to the Government Service Insurance System (GSIS), effective January 1990, are subject to the 5% expanded withholding tax. It is represented that you have just fully paid your housing loan to the GSIS; that when you tried to secure a tax clearance from the BIR Revenue District Office in Novaliches, Quezon City, the examiners, more particularly their Assistant Revenue District Officer, demanded from you, payment of documentary stamp tax as well as the 5% expanded withholding tax on all amortization payments you made to the GSIS beginning January 1990 up to the time you fully paid your housing loan; that you immediately paid the assessment for documentary stamp tax; and that however, you held in abeyance the payment for the 5% expanded withholding tax, as you could not find any legal basis for its imposition. In reply, please be informed that under Revenue Memorandum Circular No. 7-90 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, all sales, exchanges, or transfers of real properties (whether classified as ordinary or capital asset) by corporations, consummated on or after January 1, 1990, are subject to the creditable withholding tax. Applying the foregoing in the instant case, it appears that all the amortization payments you made to the GSIS beginning January 1, 1990 up to the time you fully paid your housing loan are not subject to the creditable withholding tax imposed under Revenue Regulations No. 1-90 considering that at the time of the existence of your said housing loan, your relationship with the GSIS is that of a debtor-mortgagor and creditor-mortgages, hence, there is no sale, exchange or transfer of real property as of such time upon which the creditable withholding tax could be imposed and therefore, you are not required to withhold the aforesaid tax on your amortization payments up to the time you fully paid your said housing loan. Such being the case, this Office is of the opinion as it hereby holds that your monthly amortization payments for housing loans tendered to the GSIS, effective January 1, 1990 are not subject to the 5% expanded withholding tax. Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue