Applicability of the Creditable Withholding Tax under Revenue Regulations No. 1-90 to CREBA Members

September 1, 1994 BIR RULING NO. 133-94 50 (b) 000-00 133-94 Chamber of Real Estate & Builders Association, Inc. (CREBA) 3F CREBA Center, Roces Avenue Quezon City Attention: Atty . Domingo de Vera National President Gentlemen : This refers to your letter dated November 29, 1993 requesting in effect for a ruling on the applicability of the creditable withholding tax under Revenue Regulations No. 1-90 to your members. It is represented that some CREBA members are not granted the privilege of creditable withholding tax of 2.5% provided for under RR 1-90 because the applicant must satisfy all the following conditions, to wit: 1) A certified CREBA member; 2) Habitually engaged in real estate business; and 3) Licensed by the (HLURB); that a cursory reading of RR 1-90 and considering the ordinary practice in the real estate business, the above requirement for habituality and license will have a separate and particular application to different situations, namely: 1) Those engaged both in the development and sale of lots and/or house and lot packages or condominium where the requirement for registration with, or license from HLURB/HUDCC applies; or 2) Those engaged in the buy and sell of real estate where only the requirement for habituality (qualified by the requirement of at least six transactions) applies; that to clarify the matter, you sought the opinion of the Commissioner of the HLURB, who advised you in his letter dated December 03, 1993 that based on Section 4 of Presidential Decree No. 957 otherwise known as the "Subdivision and Condominium Buyers Protective Decree", it appears that those who simply buy and sell real estate without effecting any subdivision or partitioning are not covered by the requirement to secure certificate of registration. For the above reasons, you are requesting that the conditions/requirements for the availment of the 2.5% CWT on capital gains granted to CREBA members as provided for in Section 1(J) sub-paragraph (ii) of RR 1-90 be clarified, such that the requirement of licensing/registration with the HLURB/HUDCC be dispensed with insofar as CREBA members who are not engaged as developer of subdivision or condominium projects, but who only buy and sell real property, are concerned. In reply, please be informed that under Section 4, Title II of PD 957, registration with the National Housing Authority/HLURB is required of the owner or the real estate dealer interested in the sale of lots or units, respectively, in a subdivision project or condominium project. On the other hand, Section 5 of the said decree provides that "such owner dealer to whom has been issued a registration certificate shall not, however, be authorized to sell any subdivision lot or condominium unit in the registered project unless he shall have first obtained a license to sell the project within two weeks from the registration of such project". Such being the case, since under the above cited sections of PD 957 and as opined by the Commissioner of HLURB, those who simply buy/build and sell real estate without effecting any subdivision or partitioning are not covered by the requirement to secure a certificate of registration or license to sell, then such requirement may be dispensed with. In other words, in order that CREBA members who merely engage in such kind of activity may be entitled to avail of the 2.5% (now 5%) creditable withholding tax prescribed under Revenue Regulations No. 1-90 and Revenue Memorandum Circular No. 7-90, as amended by Revenue Regulations No. 6-94 and 7-94 effective July 1, 1994, they only have to be habitually engaged in real estate business, i.e., they must have at least six (6) real estate transactions during the preceding taxable year. (BIR Ruling dated June 29, 1990, RMC 54-94) It shall be understood, however, that a certification from CREBA to the effect that a member/real estate dealer applying for authority to transfer real property is not selling the realty as the original developer/owner/dealer of the subdivision lots or condominium units, shall be presented to the Revenue District Officer concerned and the corresponding creditable withholding tax paid for every sale transaction. cdta Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue