Withholding Tax on Real Property Sales

All sales, exchanges, or transfers of real property by corporations from January 1, 1990, are subject to creditable withholding tax, regardless of asset classification.
For individuals, estates, trusts, or pension funds, only sales of ordinary asset real properties are subjected to the withholding tax; sales of capital asset real properties remain subject to the 5% capital gains tax.
The date of notarization on the Deed of Sale is prima facie evidence of the date of sale.
Special rules apply to documents notarized on or before November 30, 1989, to prevent ante-dating and improper tax application.
The Revenue District Officer may issue CAR without withholding tax if justified by extraordinary circumstances.
Exempt entities from income tax (e.g., GSIS, SSS) do not require withholding tax, except those covered under Article 26 whose income from property sales is taxable.

Corporations: All real property sales or exchanges are subject to withholding tax, which is creditable against income tax liabilities for the quarter.
Individuals, estates, trusts: Only sales of ordinary assets are subject to withholding tax; these taxes are creditable against annual income tax liability.
Sales by individuals of capital assets are exempt from withholding but subject to 5% capital gains final tax.

Reduced rates per RR 1-90 effective February 1, 1990:
- 0% if the vendor is registered with HUDCC/HLURB for low-cost housing and sale amount does not exceed P500,000.
- 2.5% if the vendor is habitually engaged in real estate business, certified by CREBA, and registered with HUDCC/HLURB.
- 5% if vendor is not habitually engaged in real estate business or conditions for lower rates are unmet.
Habitual engagement is defined as at least six taxable real estate transactions in the preceding year.
CREBA certifies members and assists BIR in determining habitual engagement.
The date of presentation of sales documents to BIR determines applicable tax rates.

Sales of real property subjected to creditable withholding tax fall under the expanded withholding tax provisions of RR No. 6-85.
The obligation to withhold arises when consideration is paid or payable.
Withholding tax return must be filed and taxes remitted within 10 days after month end.

The tax base is the gross selling price or total consideration paid, whichever is higher.
For exchanges, the fair market value of the property is used.
Installment sales' withholding applies only to payments made from 1990 onward.

No withholding required on installment payments if buyer is an individual not engaged in business; withholding applies on final installments from January 1990.
If buyer is engaged in trade/business (corporate or otherwise), buyer must withhold tax on installments and is presumed registered as withholding agent.
Proof of withholding and remittance on installments lies with the buyer-withholding agent.

CAR will not be issued without presentation of official receipt evidencing payment of creditable withholding tax.
Details of tax payment must be typed on the CAR.

Officials issuing CARs must report monthly transactions non-subject to capital gains tax and indicate expanded withholding tax paid.
Reports submitted to the Chief, Assessment Performance Control Division, BIR National Office.

The amendments and clarifications take effect on February 1, 1990.
The Commissioner of Internal Revenue mandates widespread publicity and compliance among internal revenue officials and other concerned parties.