Sale of Real Property under CMP - Exempt from Capital Gains Tax

December 27, 1993 BIR RULING NO. 521-93 SALE OF REAL PROPERTY UNDER CMP EXEMPT FROM CAPITAL GAINS TAX 50 (b) 49-90 521-93 Esla Land Developers, Inc. Green Valley Townhouses Unit 55 Valle Verde Subdivision Pasig, Metro Manila Attention: Ms . Precy Sy Manager This refers to your letter dated August 20, 1992, requesting for exemption from the payment of withholding tax (creditable withholding tax) on the sale of your real properties such as single rooms, quadrants, multi-quadrants, duplex, luxury, detached units and lots consummated prior to the effectivity of Revenue Regulations No. 1-90, and declared as sales of previous years. cdtech Documents submitted show that you are a domestic corporation engaged in business as a real estate dealer; that you are a registered owner of several parcels of land situated at Baguio City; that you are likewise the owner of a Condominium Project known as the Green Valley Single Room Units consisting of 201 single room units; that in 1982 you sold parcels of land on a deferred payment basis to different individual buyers for and in consideration of P330,400.00 payable every quarter for one year; that in 1982 and 1984, you likewise sold several units of your said Condominium Project to different individual buyers at contract price ranging from P90,400.00 to P95,444.00 payable in installment under the following terms a down payment of P10,000.00 and the balance to be paid within 120 months at P670.00 including interest of 16%/annum and in the case of the P95,444.00 contract price a down payment of P5,000.00 and the balance payable in 120 months at P753.70 per month including interest of 16% per annum; and that you reported the gains derived from the said sales in your Annual Corporate Income Tax Return in the year of sale and paid the corresponding income tax due thereon. In reply, please be informed that under Revenue Memorandum Circular No. 7-90 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, only those sales, exchanges, or transfers of real properties (whether classified as ordinary or capital asset) by corporations, consummated on or after January 1, 1990, are subject to the creditable withholding tax imposed under the aforesaid regulations. Under Revenue Memorandum Circular No. 43-91 clarifying Revenue Memorandum Circular No. 84-91 relating to ante-dating, when there is only a delay in the presentation of sales document, the rules on the kind of tax, rate of tax, zonal or fair market value obtaining at the date of notarization shall be applied, but the penalties for late filing of return and payment of tax shall be imposed. There is a delay in the presentation of sales documents to the BIR after 30 days from date of notarization. For this purpose, taxpayers have the burden of proving by the submission of other documents such as cancelled checks, official receipts, contract to sell or certification of the archive official, to show that there is no ante-dating of public instrument. Considering that the taxpayer has sufficiently proven that there was no ante-dating in this case, this Office is of the opinion as it hereby holds that the sales by the taxpayer of its realties located in Baguio City prior to the effectivity of Revenue Regulations No. 1-90 or prior to January 1, 1990 and which sales had been declared as sales of previous years are not subject to the creditable withholding tax imposed under Revenue Regulations No. 1-90 implementing Section 50(b) of the Tax Code. llcd LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue