BIR Ruling No. 634-19

October 17, 2019
BIR RULING NO. 634-19
Sections 57 (B), 188, 195 & 196 of the

National Internal Revenue Code of 1997,
as amended; RR No. 02-98, as amended;
BIR Ruling No. 568-12
T-Mar Industries, Inc.

2878 LMG Bldg., Burgos Ext. Cor. North Drive,
Villamonte, Bacolod City 6100
Attention: AAA
__________
Gentlemen :
This refers to your letter dated September 27, 2017 requesting for re-issuance of
BIR Ruling No. DA-642-2007 dated December 13, 2007 issued to T-Mar Industries,
Inc.
Documents submitted disclosed that the housing loan accounts of your clients are
processed under the "WITH BUYBACK GUARANTY" credit window under the
Housing Loan Program of the Home Development Mutual Fund ("HDMF" for brevity).
Under HDMF Circular No. 259, the Buyback Guarantee scheme has the following
features: HTcADC
a. The developer shall receive, evaluate, pre-process and approve the

housing loan applications of the HDMF's member-borrowers in
accordance with the applicable Guidelines of the Pag-IBIG Housing
Loan Program;
b. The developer shall buy back CTS/REM accounts that default or are
affected by breach of warranties during the first two years of the loan;
c. The developer shall execute a Contract-to-Sell with the Pag-IBIG

member to cover the purchase of the residential property or lot used as
collateral for the Pag-IBIG housing loan of the member;
d. The developer shall execute a Deed of Assignment assigning the CTS

in favor of HDMF which shall be annotated in the title of the property;
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e. The developer shall convert the security of eligible accounts from CTS
to REM not later than the 24th month from date of loan takeout; and
f. Transfer of title to the property is not a requisite in the granting of the

loan application and such transfer shall take place only within a period
of two (2) years from the date of loan take-out and after receipt of
formal notification from HDMF to convert the security of eligible
accounts from CTS to REM.
In reply thereto, please be informed that pursuant to Revenue Regulations (RR)

No. 2-98 as amended, the following rules are provided for buyers, engaged or not
engaged in trade or business, of real property classified as ordinary asset:
"SEC. 2.57.2. Income payment subject to creditable withholding tax and rates
prescribed thereon. — Except as herein otherwise provided, there shall be withheld
a creditable income tax at the rates herein specified for each class of payee from the
following items of income payments to persons residing in the Philippines:
xxx xxx xxx
(F) 1 Gross selling price or total amount of consideration or its equivalent paid to
the seller/owner for the sale, exchange or transfer of real property classified
as ordinary asset. —
xxx xxx xxx
(ii) If, on the other hand, the sale is on a "cash basis" or is a

"deferred-payment sale not on the installment plan" (that is,
payments in the year of sale exceed 25% of the selling price), the
buyer shall withhold the tax based on the gross selling price or fair
market value of the property, whichever is higher, on the first
installment.
xxx xxx xxx"
Likewise, RR No. 2-98, as last amended by RR No. 11-2018, laid down the rules
on the period for the filing of the withholding tax return and the payment of the proper
tax thereon, thus:
"SEC. 2.58. Returns and Payment of Taxes Withheld at Source. —
(A) Manner, Venue and Time of Filing of Withholding Tax Returns and Payment
of Taxes Withheld at Source — Taxpayers mandated to electronically file
and pay shall use the BIR's electronic system, while those not mandated has
the option to either use the said electronic system, or file with the Authorized
Agent Banks (AABs) under the jurisdiction of the Revenue District Office
where they are registered. Withholding agents located at municipalities
where there is no AAB, the returns shall be filed with the Revenue Collection
Officer assigned in the said municipality. The filing of the withholding tax
returns (BIR Form No. 1601EQ for creditable withholding tax and Form
Nos. 1602 for final tax on interest on bank deposits, 1603 or final tax
withheld on fringe benefits, and 1601FQ for all other final withholding
taxes) and payment of the taxes withheld at source shall be made not later
than the last day of the month following the close of the quarter during
which the withholding was made.
For this purpose, the quarter shall follow the calendar quarter, e.g., for
taxes withheld during the quarter ending March 31, the same shall be
remitted by the withholding agent on or before April 30. The return filed
shall be accompanied by the Quarterly Alphabetical List of Payees (QAP),
reflecting the name of income payees, Taxpayer Identification Number
(TIN), the amount of income paid segregated per month with total for the
quarter (all income payments prescribed as subject to withholding tax under
these regulations, whether actually subjected to withholding tax or not
subjected due to exemption), and the total amount of taxes withheld, if any.
Considering that taxes withheld by the withholding agents are held in trust
for the government and its availability is an imperious necessity to ensure
sufficient cash inflow to the National Treasury, withholding agents shall
file BIR Monthly Remittance Form (BIR Form No. 0619E and/or 0619F)
every tenth (10th) day of the following month when the withholding is
made, regardless of the amount withheld. For withholding agents using
EFPS facility, the due date is on the fifteenth (15th) day of the following
month. Withholding agents with zero remittance are still required to use
and file the same form.
In the case of sale of shares of stocks not traded thru a local stock exchange
and sale of real property considered as capital asset, the filing and payment
of the tax due thereon shall be made within thirty (30) days after the sale or
disposition using BIR Form Nos. 1707 and 1706, respectively. For sale of
real property considered as ordinary asset, the remittance of tax withheld
shall be made on or before the tenth (10th) day following the month of
transaction using BIR Form No. 1606.
(B) Withholding Tax Statement for Taxes Withheld — Every payor required to
deduct and withhold taxes under this subsection shall furnish each payee, a
withholding tax statement, in triplicate, within twenty (20) days from the
close of the quarter. The prescribed form (BIR Form No. 2307 for creditable
withholding tax and BIR Form 2306 for final withholding tax) shall be used,
showing the monthly income payments made, the quarterly total, and the
amount of taxes withheld. Provided, however, that upon request of the
payee, the payor must furnish such statement, simultaneously with the
income payment. (Emphasis supplied)
Based on the foregoing, the appropriate creditable withholding tax, in the case of
HDMF grant or release of housing loans, shall be withheld upon release or receipt of the
loan and should be remitted based on the deadline provided under the above quoted
provisions of RR No. 2-98, as amended. The execution of a Contract to Sell by a

developer in favor of a client/unit purchaser does not vest on the latter title over the
subject property. Likewise, the execution of a Deed of Assignment by a developer in
favor of HDMF, of the property subject to said Contract to Sell, does not vest title to the
HDMF nor to a client/unit purchaser, since the purpose of executing said deed and
annotating the same in the title is just to secure the housing loan contracted by a
client/unit purchaser with HDMF. Thus, the execution by T-Mar Industries, Inc. of a
Contract to Sell in favor of a client/unit purchaser and subsequently its execution of a
Deed of Assignment in favor of HDMF, in order to secure the housing loan of a
client/unit purchaser, are not subject to the CWT under Section 2.57.2 (F) of RR No.
2-98, implementing Section 57 (B) of the National Internal Revenue Code of 1997, as
amended, nor to the DST under Section 196 of the same Code. However, the notarial
acknowledgements of both documents are subject to the DST under Section 188 2 of the
same Code.
Moreover, in case of sale of real property paid under installment payment or

deferred payment basis, the payment of the documentary stamp tax (DST) imposed under
Section 196 of the National Internal Revenue Code of 1997, as amended, accrues only
upon the execution of the Deed of Absolute Sale but the basis for the imposition thereof
shall be the gross selling price or fair market value of the property, whichever is higher, at
the time of the execution of the Contract to Sell in accordance with RR No. 17-2003
dated March 31, 2003.
Finally, in the case of sale of property on installment basis or deferred payment

basis where the Contract to Sell is always executed before the execution of the Deed of
Sale, the said Contract to Sell must be attached to the Deed of Absolute Sale executed
upon completion of the payments and the duly notarized original duplicate copy of both
documents must be presented to the RDO having jurisdiction of the place where the
property is located for validation of the correctness of payment of all applicable taxes
before the issuance of CAR/TCL.
This ruling is being issued on the basis of the foregoing facts as represented.
However, if upon investigation, it will be disclosed that the facts are different then the
ruling shall be considered null and void. DETACa
Very truly yours,
(SGD.) CAESAR R. DULAY

Commissioner of Internal Revenue
Footnotes
1. As renumbered by RR No. 11-2018 dated January 31, 2018 (Amending Certain
Provisions of Revenue Regulations No. 2-98, as Amended, to Implement Further
Amendments Introduced by Republic Act No. 10963, Otherwise Known as the "Tax
Reform for Acceleration and Inclusion (TRAIN)" Law, Relative to Withholding of
Income Tax).
2. Republic Act (RA) No. 10963 increased the DST from P15.00 to P30.00 effective
January 01, 2018.

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October 17, 2019

BIR RULING NO. 634-19

Sections 57 (B), 188, 195 & 196 of the

T-Mar Industries, Inc.

a. The developer shall receive, evaluate, pre-process and approve the

c. The developer shall execute a Contract-to-Sell with the Pag-IBIG

d. The developer shall execute a Deed of Assignment assigning the CTS

Copyright 2020 CD Technologies Asia, Inc. 1

f. Transfer of title to the property is not a requisite in the granting of the

In reply thereto, please be informed that pursuant to Revenue Regulations (RR)

xxx xxx xxx

xxx xxx xxx

(ii) If, on the other hand, the sale is on a "cash basis" or is a

xxx xxx xxx"

"SEC. 2.58. Returns and Payment of Taxes Withheld at Source. —

Copyright 2020 CD Technologies Asia, Inc. 3

Moreover, in case of sale of real property paid under installment payment or

Finally, in the case of sale of property on installment basis or deferred payment

Very truly yours,

(SGD.) CAESAR R. DULAY

Copyright 2020 CD Technologies Asia, Inc. 5

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