Applicability of 0% or 2.5% Creditable Withholding Tax on Sales of Real Property at Dreamland Phases I & II

October 2, 1992 BIR RULING NO. 275-92 50 (b) 200-92 275-92 UNIVAC Development, Inc. 8th Floor, Erechem Bldg. Cor. Herrera and Salcedo Sts., Legaspi Village, Makati Metro Manila Attention: Atty . Rene C . Diolosa Gentlemen : This refers to your letter dated June 13, 1992 asking for clarification as to the applicability of 0% or 2.5% creditable withholding tax on your sales of real property at DREAMLAND PHASES I & II, located at Pico, La Trinidad, Benguet. It appears that you have already sought the opinion of the BIR Regional Director, Baguio City as to the applicability of 0% or 2.5% creditable withholding tax on your sales of real property at Dreamland Phases I & II located at Pico, La Trinidad, Benguet; that in reply, the Director in effect states that your corporation is liable to 2.5% creditable withholding tax on your sales of real property notwithstanding that the following elements in favor of your company are present, namely: (a) that the consideration for the sale of the corporation's real property does not exceed P500,000.00; (b) that the corporation is registered with the Housing and Land Use Regulatory Board (HLURB) which has issued in favor of the corporation a Certificate of Registration and License to Sell; and (3) that the corporation is likewise registered with the Chamber of Real Estate Builder's Association (CREBA); that with due respect to the opinion of the Regional Director, you believe that your company is entitled to 0% expanded withholding tax pursuant to Revenue Memorandum Circular No. 16-90 which modified Revenue Memorandum Circular No. 7-90, hence this request. In reply, please be informed that under paragraph nos. 2 and 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 P500,000.00. 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. 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 project at Dreamland Phases I & II located at Pico, La Trinidad, Benguet is registered with the Housing and Land Use Regulatory Board under Certificate of Registration No. 0981 and was issued with the corresponding License to Sell under License to Sell No. 0967 coupled with the sale thereof ranging from P115,000 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 Dreamland Phases I & II, located at Pico, La Trinidad, Benguet that are within the range of P115,000 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 project as tax base in computing the creditable withholding tax on your sale thereof. Very truly yours, JOSE U. ONG Commissioner of Internal Revenue