Taxability of a Corporation, Engaged in Realty Business, Who Sell Its Undeveloped Lands

August 27, 1992 BIR RULING NO. 232-92 21 (e) 21 (a) 107-91 232-92 Congressman Hernando B. Perez House of Representatives Quezon City Attention: Mr . Donald Z . Marasigan Technical Staff Chief Committee on Ways and Means S i r : This refers to your letter dated June 26, 1992 requesting a ruling on the following queries: "1. Can a corporation, engaged in realty business, sell their undeveloped lands and be subjected to a final capital gains tax instead of subjecting it to income tax? cdpr 2. If another corporation not engaged on realty business sell their assets, could this transaction be subjected to a final capital gains tax instead of income tax?" In reply, please be informed that under Section 21 (e) of the Tax Code, as amended, only individuals, including estates and trusts shall be taxed on capital gains presumed to have been realized from the sale, exchange or other disposition of real property located in the Philippines classified as capital assets, at the rate of 5% based on the gross selling price or the fair market value/zonal value of the properties whichever is higher. A corporation, whether or not engaged in realty business is not subject to the final capital gains tax but to the 35% corporate income tax based on the taxable gain realized in the sale of real property under Section 24 (a) of the Tax Code amended. Moreover, pursuant to Revenue Regulations No. 1-90, as amplified by Revenue Memorandum Circular No. 7-90 all sales, exchanges or transfers of real property (whether classified as ordinary or capital assets) by corporations, consummated on or after January 1, 1990, are subject to the creditable expanded withholding tax. Very truly yours, JOSE U. ONG Commissioner of Internal Revenue