Payment of 2.5% Withholding Tax on the Sale of Property

September 6, 1990 BIR RULING NO. 172-90 50 (b) 000-00 172-90 S i r : This refers to your letter of even date requesting a ruling to let your company, M.C. Evangelista & Co., Inc. to pay 2.5% withholding tax on the sale of its property affected by the acquisition of the right-of-way (ROW) by the NCR, DPWH for the construction of the extension of Dagupan Street, Manila. aisadc It is represented that the sale was made to give way for the acquisition of the right-of-way by the NCR, DPWH and your company to implement the infrastructure project to construct the extension of Dagupan Street at the District of Tondo, Manila; that this project was programmed and was included on the approved budget for calendar year 1990 by NCR, DPWH to ease the congested traffic corridors of the City of Manila, along Juan Luna St., and Jose Abad Santos Avenue; that your company's property affected by this project is 4,618 sq.m., which will be stripped off by 30% of its nucleus portion; and that your company has no other alternative, inasmuch as this project right-of-way will benefit the great majority of Metro Manila. In reply, please be informed that under Revenue Memorandum Circular No. 7-90 dated January 16, 1990 to be entitled to the lower rate 2.5% creditable withholding tax imposed under Revenue Regulations No. 1-90 amending Revenue Regulations No. 12-89 implementing Section 50(b) of the Tax Code, as amended, the vendor must be one who is habitually engaged in real estate business, certified as member by the Chamber of Real Estate and Builders Association, Inc. (CREBA), and is registered with the Housing and Urban Development Coordinating Council (HUDCC)/Housing and Land Use Regulatory Board (HLURB). For this purpose, a vendor shall be considered "habitually engaged in real estate business" if he has consummated during the preceding year at least six taxable real estate transactions, regardless of amount. A vendor who has previously been accredited by CREBA and registered with HUDCC/HLURB may still be considered habitually engaged in real business even if the number of sales made during the year falls below six. Such being the case, and since your company is a member of CREBA, and licensed by HLURB, it is therefore, habitually engaged in real estate business subject to the lower rate of 2.5% creditable withholding tax prescribed under Revenue Regulations No. 1-90 implementing Section 50(b) of the Tax Code, as amended. Accordingly, your request that the aforementioned sale of portion of your company's real property in favor of the government as represented by the NCR, DPWH be subject to 2.5% creditable withholding tax under Revenue Regulations No. 1-90 is hereby granted. casia Very truly yours, (SGD.) JOSE U. ONG Commissioner