Applicability of 0% Creditable Withholding Tax on Sales of Individual Lot or House and Lot Under a Socialized Housing Project

July 9, 1992 BIR RULING NO. 200-92 50 (b) 107-92 200-92 J. F. Proximo Holdings and Development Corporation No. 2 Hornbill Street, Green Meadows Subd., Quezon City, Metro Manila Attention: Mrs . Rufina P . Proximo President Gentlemen : This refers to your letter dated May 25, 1992 asking for clarification as to the applicability of 0% or 2.5% creditable withholding tax on your sales of individual lot or house and lot at RUFINA SUBDIVISION, San Fernando, La Union and CELESTIAL VILLAGE, Baguio City. cdti It is represented that your company is engaged in the real estate business; that you are a member of CREBA in good standing; that your projects at Rufina Subdivision, San Fernando La Union and at Celestial Village, Baguio City were duly covered by necessary Development Permit in conformity with PD 957; that your project is also covered by a Certificate of Registration from the Housing and Land Use Regulatory Board (HLURB); that you cater principally to low income earners and PAG-IBIG members; that your normal selling price ranges from P93,000 to less than P500,000 as evidenced by your Contract to Sell or Deed of Sale with your various customers, hence, this request. In reply, please be informed that under paragraph nos. 2 & 3 Revenue Memorandum Circular No. 7-90 as amended by Revenue Memorandum Circular No. 16-90 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, in order to remove the bias against Low-Cost housing projects registered under PD. No. 957 and to simplify tax administration all sales, exchanges or transfers of real property on or after March 1, 1990 shall be subject to zero (0%) percent, regardless of the law under which the project is registered, provided that the consideration does not exceed P500,000. In other words, it is the selling price or consideration (and not the law under which a project was approved) that determines whether or not a transaction is socialized/low cost in nature. Moreover, to be entitled to the lower withholding tax rate of 0% or 2.5%, the presentation of the Certificate of Registration and License to Sell for a subdivision or condominium project issued by the Housing and Land Use Regulatory Board (HLURB) shall be sufficient proof for purposes of the required Housing and Urban Development Coordinating Council (HUDCC) /HLURB Certification in the regulations (Revenue Regulations No. 12-89 as amended by Revenue Regulations No. 1-90). Such being the case, and since your residential subdivision projects at Rufina Subdivision located at San Fernando, La Union and Celestial Village located at Baguio City are registered with the housing and Land Use Regulatory Board under Certificate of Registration Nos. CR-01-91-0003 and 86-09-411 respectively, and were issued with their corresponding License to Sell under License to Sell Nos. LS-01-0003 and 86-09-409 coupled with the sale thereof ranging from P93,000 to less than P500,000 per unit (lot or house and lot), this office is therefore, of the opinion as it hereby holds that your sale of your residential lot or house and lot at Rufina Subdivision, San Fernando, La Union and Celestial Village, Baguio City that are within the range of P93,000 to less than P500,000 as verified to be within such price range by the Revenue District Officer where the property is located is subject to the 0% creditable withholding tax imposed under Revenue Regulations No. 1-90 implementing Section 50 (b) of the Tax Code. This renders inapplicable the use of the zonal valuation as well as the revised zonal valuation of the aforesaid projects as tax base in computing the creditable withholding tax on your sale thereof. Very truly yours, JOSE U. ONG Commissioner of Internal Revenue