Applicability of the Creditable Withholding Tax under Revenue Memorandum Circular No. 16-90 to Realty Estate Business

September 23, 1992 BIR RULING NO. 271-92 50 (b) 023-92 271-92 Vive Eagle Land, Inc. Eagle Crest Building Sen. Gil J. Puyat Ave. cor. Pasong Tamo Makati, Metro Manila Attention: Mr . Virgilio J . Cervantes President Gentlemen : This refers to your letter dated July 24, 1992 requesting in effect a ruling as to the applicability of the creditable withholding tax under Revenue Memorandum Circular No. 16-90 to your realty estate business. cdt It is represented that your company is engaged in real estate business with a subdivision project in Baguio City; that you are registered with the Housing and Land Use Regulatory Board (HLURB); that your sale consideration per unit on the above project ranges from P200,000 to P450,000 per lot or below P500,000 per sale; and, that your company is a member in good standing of the Chamber of Real Estate and Builders Association, Inc. (CREBA). In reply, please be informed that as provided for in Revenue Regulations No. 7-90, the rates of creditable withholding tax on sales, exchanges or transfer of real properties have been reduced to 0%, 2.5% or 5% for real estate transactions, the deed of sale or transfer of which have been filed with the BIR on or after February 1, 1990 . Under said issuances, the vendor of real property becomes entitled to zero (0%) percent only if the consideration for the sale of lot or house and lot per transaction does not exceed P500,000.00 and he is registered with and certified to as engaged in low-cost housing projects under Batas Pambansa Blg. 220 (socialized housing law) by the Housing and Urban Development Coordinating Council (HUDCC) or the Housing and Land Use Regulatory Board (HLURB). And when the vendor's housing project is registered with the above-mentioned government agency under Presidential Decree No. 957 (open market housing law), the transaction will be subject to either 2.5% or 5% withholding tax, notwithstanding the fact that the consideration is not more than P500,000.00. However, in order to remove the bias against low-cost housing projects registered under P.D. 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 P500,000.00. 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. This is also in conformity with the prevailing ceiling for the low-income housing as set by government housing facilities like the Pag-ibig. To be entitled to the lower withholding tax rates of 0% or 2.5%, the presentation of the copies of the Certificate of Registration and License to Sell for a sub-division or condominium project issued by HLURB shall be sufficient proof for the purposes of the required HUDCC/HLURB certification. (Revenue Memorandum Circular No. 16-90 dated February 16, 1990). Such being the case, since as a seller of housing lots, Vive Eagle Land, Inc. is registered with and certified to as engaged in housing projects by the HLURB under P.D. No. 957 (open market housing law) its deed of sales which have been filed with the BIR on or after February 1, 1990 (but before March 1, 1990) shall be subject to either 2.5% or 5% withholding tax, notwithstanding the fact that the consideration is not more than P500,000.00, pursuant to Revenue Regulations No. 1-90. On the other hand, subject to the same conditions abovementioned and regardless of the law under which the project is registered/approved , the sale of its lots on or after March 1, 1990 where the consideration does not exceed P500,000.00, as verified by Revenue District Officer where the property is situated shall be subject to zero (0%) percent pursuant to Revenue Memorandum Circular No. 16-90. It is understood, however, that Vive Eagle Land, Inc. shall be subject to the regular income tax on the gain derived from such sale, which should be reported in its income tax return to be filed on or before April 15 of the following year, with its expanded withholding taxes under Revenue Regulations No. 12-89 as amended by Revenue Regulations No. 1-90 credited against its regular corporate income tax due. (Emphasis supplied). LibLex This ruling is issued on the basis of the facts as represented. If upon investigation it is found out that the cost of a lot or lots sold to a single buyer at any one time exceeds P500,000.00, the sale shall be automatically be subject to 2.5% expanded withholding tax pursuant to Revenue Regulations No. 1-90 and Revenue Memorandum Circular No. 16-90. It should be understood that a Certification to Register your Deed of Sale with the respective Register of Deeds shall be secured from the Revenue District Officer having jurisdiction of the place where the property is located, and upon payment of the corresponding documentary stamps tax due thereon. Very truly yours, JOSE U. ONG Commissioner of Internal Revenue