Applicability of the Withholding Requirement under RR Nos. 12-89 and 1-90 for Properties Acquired in 1988

May 28, 1992 BIR RULING NO. 170-92 21 (e) 50 (a) 000-00 170-92 The Honorable Secretary Department of Labor and Employment Intramuros, Manila Attention: Mr . Dennis P . Ancheta Legal Service S i r : This refers to your letter dated March 6, 1991 requesting for an exemption from the payment of both the expanded withholding tax and documentary stamp tax levied upon the acquisition by the Department of Labor and Employment (DOLE) of certain real properties. LibLex It is represented that in 1975, the Social Security System (SSS) and the Government Service Insurance System (GSIS) bought eight parcels of land, with buildings and improvements thereon, covered by Transfer Certificates of Title Nos. 120035, 120036, 120037, 120038 and 120081, for eventual sale to the DOLE; that on March 17, 1976, a Deed of Conditional Sale was executed by and between the GSIS and SSS as vendors and the DOLE as vendee; that in September, 1988, when DOLE had already fully paid the purchase price and interests agreed upon, a Deed of Absolute Sale was executed by and between the parties; that although the possession of the subject properties has been in the hands of the DOLE since the execution of the Deed of Conditional Sale, the Certificates of Title relative thereto, however, have remained in the names of the SSS and GSIS; that presently, the DOLE seeks to have said certificates of title transferred in its name; that in view of the stipulation set forth in the Deed of Absolute Sale to the effect that the Dole shall be liable to pay for any and all expenses, if any, relative to the issuance of the corresponding transfer certificates of title, the DOLE now wishes to be exempted from the payment of the expanded withholding tax and documentary stamp tax. In reply, please be informed that pursuant to Revenue Memorandum Circular No. 7-90, clarifying Revenue Regulations Nos. 12-89 and 1-90 prescribing the withholding of creditable income tax on sale, exchange or transfer of real property, the obligation of the payor to deduct and withhold arises at the time the consideration is paid or payable. (par. 4, RMC 7-90). In the case of installment sales, only such amounts paid beginning in January, 1990 shall be subject to the withholding tax in consonance with the rule that regulations shall apply prospectively. Thus, installment payments made before 1990 shall not be subject to withholding. Accordingly, as in the instant case, since the Deed of Absolute Sale was executed by and between the parties in September 1988 when DOLE had already fully paid the purchase price and interests agreed upon, and therefore, before January, 1990, the withholding requirement under Revenue Regulations Nos. 12-89 and 1-90 will not apply. The above notwithstanding, the Certificate Authorizing Registration (CAR) may not be issued until the corresponding corporate income tax and documentary stamp tax shall have been paid by the vendors GSIS and SSS whose tax exempt status has been withdrawn by Executive Order No. 93. However, this is without prejudice to the vendors' right to reimbursement in accordance with the stipulation on the matter in their contract with DOLE. The corporate income tax, as well as the documentary stamp tax, shall be computed on the basis of the purchase price appearing in the Deed of Sale or the zonal valuation of the properties involved, whichever is higher. Any improvements thereon shall be valued pursuant to RAMO No. 2-91. cdtech Very truly yours, JOSE U. ONG Commissioner of Internal Revenue