Question & AnswerQ&A (BIR REVENUE MEMORANDUM CIRCULAR NO. 16-90)
The rates of creditable withholding tax are 0%, 2.5%, or 5%, depending on the nature of the transaction and the vendor's certification.
A zero (0%) percent rate applies if the consideration for the sale does not exceed P500,000 and the vendor is registered and certified as engaged in low-cost housing projects under Batas Pambansa Blg. 220 by HUDCC or HLURB.
If the housing project is registered under PD No. 957 (Open Market Housing Law), the transaction is subject to either 2.5% or 5% withholding tax, even if the consideration is not more than P500,000.
As of March 1, 1990, all sales, exchanges, or transfers of real property with consideration not exceeding P500,000 are subject to a zero (0%) percent withholding tax regardless of the project registration law.
The selling price or consideration—not the law under which a project was approved—determines if a transaction qualifies as socialized or low-cost housing for the purpose of withholding tax rates.
Presentation of copies of the Certificate of Registration and License to Sell for a subdivision or condominium project issued by HLURB suffices as proof.
The date of presentation of the sales documents to the Bureau of Internal Revenue (BIR) is the determinant of the applicable withholding tax rate.
RMC No. 16-90 modifies RMC No. 7-90 by expanding the zero percent withholding tax to all sales with consideration not exceeding P500,000 regardless of the housing law, effective March 1, 1990.
The Housing and Urban Development Coordinating Council (HUDCC) and the Housing and Land Use Regulatory Board (HLURB) are the agencies involved.
To remove bias against PD 957 registered low-cost housing projects and to simplify tax administration, aligning with prevailing housing finance ceilings such as those set by PAG-IBIG.