BIR Ruling No. 296-2022

Lr REPUBLiG: O>F IHF PHILII'PINES

DEPARTMENI CY FINANCE BUREAU OF INTERNAL REVENUE

Quezon Citv

Sections 24 (D) (1). 27 (D) (5). 204 RMC No. 43-11: RR No. 2-1998: RR No 09-2012 (C) and 229, Tax Code

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HOME DEVELOPME: T MUTUAL FUND Gaisano City Mall Araneta St.. Singcang Bacolod City

Attenti n: Department Manager III MR. WILMER B. LIRAZAN

Head. Bacolod Housing Business (Tenter ATTY. GHLBERT FRANCIS A. UY II

Genle.nen:

"Fund") for: (1) reco :si eration of Memorandum No. 18-2015 dated December i6. 2015 Fund (Pag-IBIG Fund re {uest for exenption from Creditable Withholding Tax (CWT) on the sale of Pag-Ibig Fumu a juired proper:ies in Panav Island end for refund of all payments muk' from time of up re ral of RM(': o. 43-2011:" and (2) refund of all the payments it made from the time o t e approval cf Revenue Memorandum Circular ("RMC") No. 43- 201I (collectively. the R -quest"). issued by then Comn issioner Kim S. Jacinto-Henares. RE: "Home Development Mutual This refers to y. !! request on behalf of Home Development Mutual Fund (the

Boukgroumd

1 The Fund requ st d for tax exemption from payment of creditable withholding tax

("CWT"/capit t ains tax ("CGT") on the sale of its &cquired real properties where Republic Aet N . "679 as circularized by RMC No. 43.1.011' and RMC No. 6-20122. title is already : on -olidated in the name of the Fund a:: provided under Section 19 of

I. On December I'. 2015. Cmmissioner Kim S. Jacinto-Henares. the then

Memorandum : o. + 8-2015 ("Memorandum") where r: it ruled that the sale of real Commissioner :" 'IR") of the Bureau of Internal Revenue ("Bureau") issued

properties of d -f:: :Iting borroers-members that we:: foreclosed by the Fund is

- ( ircularizing Section 19 . P public Act Nc. 9079 known as the "Home: Development Mutual Fund Law ot 2009." dated September 28. 2% i 20( Jated February 15. 2t2 : ( ircularizing Section 19 : 'R publie Act No 067u known as the -Humai Development Mutual Fund Law of

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asset. or CW" i iposed under Section 57 of the Tax Code and RR No. 2-1998. as amended. if ie >ame is an ordinary asset: (b) value added tax ("VAT") imposed asset: and (c) m 'unentary stair:p tax ("DST") imposed under Section 196 of the Tax Section 57 of iie National Interial Revenue Code of 1997. as amended ("Tax Code") under Section 10 . of the Tax Code and RR No. 16-2005. if the property is an ordinary Code, to wit. subject to: (a) C :T imposed under Sections 24 (D) (1) and 27 (D) (5) in relation to and Revenue :etulations ("RR") No. 2-98. as amended, if such property is a capital

huve he n .ealized by the ou'ner of the property from the sale, exchange, or withhol. ' urd collect the tuxe's due on the sale of its acquired real properties propertt u public auction to entoree payment of unpaid loans fronm its horrov -s- memhers. the (GT is imposed upon cepital gains presumed to the fore le: ed real properties during public auctick.s, only acts as the agent of the hu..rowers-members. umd. thus. is the :ne obligated to ensure IBIG F mi cannot im'oke its tux exemption under Section 19 of RA 9679 to during I Hh te auctions... "It is v -I' .u note that while it is the Pag-IBIG Fund which sells the real other d: p. cition of the reul property: In short, the FAGIBIG Fund, in selling collecti: n .nd pay'men ot .the taxes due on the sale thereof. Hence, the Pag-

3. In relation to he Memoranduni. on April 2. 2019. Atty. Gilbert Francis A. Uy III. Head of the Fund. requested for reconsideration and clarified that the subject foreclosed rea Properties were already acquired assets of the Fund ("Acquired as agent of tl : horrower-members. but as already the owner of the same. Also. Properties"). \s :uch. in selling these Acquired Properties, the Fund was not acting

redemption perioI has alread, expired. the Fund is the absolute owner of the properties. Fu: he . the Fund w'as selling the Acquired Properties not to enforce the considering th it the foreciostre proceeding has long been completed and the pay'ment from's member-borrower but as an owner of the same.

In reply. pleas : te informed that the Fund is a government-owned and controlled corporation ("GOCC' c eated under Republic Act ("RA") No. 9679.3 which is involved in. among others. extendi g Housing loans: to Fund members.

borrower-mortgagor. : ucrion the same publicly. and apply the proceeds to the debt of the obligations. the Fund is granted a right to foreclose the reat properties of such defaulting Having this oi re gard, in the event of non-payment by a borrower-member of its

same. to u'it:

powers and fune -ot s specified in this Act and the usual corporate powers "SECTION 13. Po.rers and Functions of the Fund. Tie Fund shall have the

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uccountabilities. in (uding unpaid contributions in favor_s the Fund arising_ from (yt To ensure t e ollection and recoven of all indebteiness, liabilities andior um' cause or sor "s or whatsoever due from all obligors, vhether puhlic or private:

Purposes. June i. 2009. Republic Act No. 9679. .n Ict Further Strengthening the Home Deve..pment Mutual Fund. and for Other I Ihid. G

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to denund pu te: ' ot the obligations reterred to herein. umd in the event of failure

or refusal of l. . ligor or dehtot to comply with the demumd, to initiate or institute

pper uctions pr suits. criminal, chvil, acdministrative. or otherwise. the uecessary hefore the cou -s. tribunals. commissions. boards or bodies of proper jurisdiction.

That the Fund mus compromise or release, in whole or in part. Provided. howt te. um interest. pe tal v or civil liahitin: to the Fund in connection with the collection of

- ut the lending orerations of the Fune!, under such terms and cimtrihutioms conditions us p es. ribed hy the Board of Trustees: Providest further._That the Board

ur endation of ths Chief Executive Officer deputize am member of may. upon ree? I. aff to act as sneciul sheriff in foreclosure cases. in the sale or the Fund's leg. .tebtor's properties. und in the_enforcement of court writs und attachment of ss involving the Fund The special sherift of the Fund shall make a

report to the pr pe. processes in ce as if it were am -et it its own sherif's in all resperts. - court afier any action taken hy him. w'nich shall treut such action

Fund Circular M -. 42* ("Circular") provides the procedure or guidelines for the recovery of the Fun t's investment from housing loan accounts secured by real estate mortgage that are in let iult through extrajudicial foreclosure. Under RA No. 9679 and the Circular. the Fund ma. F irticipate in the public auction. *

It is worthy to n: te that there are two (2) transactions involved in the event the Fund opt to collect the obi _atons of the borrower-mortgagor through extrajudicial foreclosure of mortgaged real propet ie:

I. Sale of f ret losed properties of the borrower-irortgagor. wherein the the horrow "r-nortgagor ("Sale of Foreclosed Properties"); and proceeds r -ceived from the highest bidder will be applied to the debt of

2. Sale of prs pe ties acquired by the Fund during foreclosure of properties (The Fund heing the highest bidder) to a third party via a public auction ("Sale of A cq tired Properties").

I. Sate of Foreclose: P.operties

the Sheriff s percenta: e tees. secure the certificate of sale and register the Certificate of Sale ("COS") with the cor :e: ned Registry of Deeds within sixty (60) calendar days from receipt at' the said cOS. In the event th u :he Fund partisipates in a bid and is the highest bidder. it shall pay

in-interest or any judi :ia' creditor. or :iny person having a lien on the property mortgaged. from the date of regis ration of the COS by pay ing the redenption price in accordance with Item No. I.C.t5 of the Ci"cular. to wit: whether natural or jur dical person. may redeem the forectosed property within one (1) year Section II (E) of :he Circular provides that the borrower-mortgagor, his successor's-

"II SPEC 'F PROUISIONS

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April 16. 2019. This ciret ar Section IDtof circu u mended HDMF (ircular No. 304 dated March 23. 2012. . 424

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(E, RED W TION OF THYFORECLOSED PROPERTY

hiving u lien .-- t' properh' suhseguent to the morigage under which the property. hus heen sold. redeem the foreclosed propertwithin_a period of.one_(l year accordance wit .t. provision of Item No. I.C.I5 hereof. " (Underscoring supplied) am judicial cr: dit r or judgment ereditor of suid borrower-creditor, or any person trom the _.date pecial power In ull cu. 's u which an exuajudicial foreclosure sate: has heen made under a u registration ot_the Cos by_puving_the redemption price in -f uorney. the horrower-mortgagor, his successoris-in-interest or

consolidated in the iatte of the Fund. Upon consolidation of title. .the respective tax creditor. or any per: on having a lien on the property mortgaged. failed to redeem the declarations covering th : subject prcperties shall also be consolidated in the name of the Fund.? foreclosed real prope: ie: within the redemption period. the titie of the said properties will be In the event t iat the borrower-mortgagor. his successor/s-in-interest or any judicial

Circular and Section 2 o1 RR No. 09-2012:8 When it come: to payment of taxes. the Fund should be: guided by Section I (G) of the

Circular Vo +2 :

"I. GENERAL I R IISIONS

G. CONSOLID. TI N OF TITLE

The Fum. st ill comply set'we the following requirements. 1.? Pan. 'ie Documentury Stanp Tax (DST): 1.+ Secu e > parate certified true copies of the Tax:Declaration of Land and 1.3 Secu e"ertificute Authorizing Registration (CatR) from the Bureau ot 1.5 Secu & H ux Clearance by pay'ing the Reul Estat: Tax (RET) and Transfer 1.I Pay're"upital Gains Tux (CGTr: Intet tu) Revenue (BIR): Buil. in:: from the Cit: or Municipal Assessor 's Office.

Fee : + t (in Municipal Treusurer 's Office.

Revemue Regui ti ns Mo..9-2013

regardless of th t ve of proceedings and personality: of mcrtgagees'selling persons imposed under : ?c1:on 5- and RR 2-98.as amended, if the:property is_an ordinury Foreclosed:Auci on d Off Propert: ies within the Applicable Statutory Redemption Period. -- In c se ot non-redeniption of properties sold during imvoluntary sales. (D) (5) of the I. x 'ode, in relation to Section 57 of the Tax Code and RR 2-98, as umended._if the ronerty is a capital asset; or the Creditable Withholding Tax (CWT) asset:_the Falue 1.: ted Tax (VAT) imposed under Section 106 of the Tax Code and RR 16/2005, as :m ended:_and the Docunientarr: Stamp Tax (DST) imposed under Sectiok196 of il I ix Code shall become due. r entities, the ( ap tal Guins Tax (CGT) imposed under Seetions 24 (D) (1) and 2 "SECTI N 2. Taxabilin .of (wner's Mortgagor's: Failure to Redeem His

on Non-Redemption of Pre er: es Sold During Involuntary Sales. May 31. 2012 Implementing Seetions 2. Section I (G) of Cireular' o. +24. (): (1). 27 :D151. 57. 106 and 196 of the Na:i.onal Internal Revenue Code ot 1997

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the Bureau wi: ir: thirry: (30) days from the expiration of the applicable statutory the follouing y: tr(Underscoring and emphasis supplied) redemptio pe! ? within ten (lo) lun< tollowing the end ot the uouth after expiration of the applicable Statutor?' reden ot n period. provided thu, tor tuxes withheld in December, the CHT return shall be -il. i und the taxes remitted to the Bureau sn or before January 15 of or CW'T due ft ini the sale, shall then file the (GT return and remit the said tax to The ht. st at the suhiect rrorern. who is deemed t? have withheld the CGI ..or tile the i"'u'T return und remit the said tax to the Bureau

of non-redemption ot pr perties sotd during involuntary sales (i.e.. foreciosure of mortgaged applicable statutory' r. demption pericd. If the subject property' is an ordinary asset. the buyer shall file the CW'T re'ur't and remit the CW'T within ten (io) days foilowing the end of the properties). who is de 'm :d to have w ithheid the CGT or CW1' due from the sale, shall.file the CGT return and remit th: CGT to the Bureau w ithin thirty (30) days from the expiration of the Based on the fo e-cited provisions. the buyer of the real property foreclosed. in case

month after expiratioi ol the applicable statutory redemption period.

It the subject i rorerty sold is under the circumstances which warrant the imposition of

before the 20th day o 2 :th day. whichever is applicable. of the month following the month VAT. the same must b.: paid to the -BIR by the VAT-registered borrower-mortgagor on or

When the right of red. nt: ion prescribes.

Moreover. the D I return shatt be tiled and paid to the BIR within five (5) days after the ctose of the montt at er the lapse of the applicable redemption period.

Please note tH it :he CGT/CWT'VAT and DST shali be based on the higher of the consideration (bid + ri - of the highest bidder) or the fair market value or zonal value as determined in accor 'ar re w ith Section 6 (E) of the Tax Code.

No. 9679. as implems nte I by Section I! of its implementing ruies and regulations ("IRR"). which provides that he Fund and all its assets and properties are exempt from any tax. This Office is of :he opinion that this position is not in.conflict with Section 19 of RA

assessment. fee. charg -. : r customs or import duty. to wit:

persons entitleu th reto, except to puy uny' debt of the meniber to the Fund. No tax meusure of_wh. ter r nuture enscted shull apply_.o the Fund.unless it expresshy revokes the dec! tre I policy of the Stute in Section 2 hereotyranting tax exemption to theFumd.n (Underscoring s pr ied) contrury notwit. st. ning. the Fuod and all its assets and properties, all contrihutions collected and a ' a cruals thereto and income or investment earnings therefrom, as and shall not hi li. Hle to attuchments. garnishntents. levy oi seizure by or under any legul or equitat e y rocess whatsoever, either hefore or aftr receipt by the person or w ell us all supy "ie: equipment, pupers or documents shall be exempt from am' tax. assessment, fee. shsirge, or customit or import duty: und all benefit pay'ments made by the Pug-IBIG F me: shall likewise he' exempt from all kinds. of taxes. fees or charges. "SECTloN 19. E: mption from Tux. Legul Process ana Lien. I I. ' assessmentuguinst. the Fumd_ shall he.mull and roid. All laws to the

bidder). and deeme: te have withheld the taxes due from the sale, must file the necessary: return and remit the '- 's to the Bureau within the prescribed period. of taxes due on the sa'e. the Fund. which is the buyer (as:uming that it was the highest Foliowing the ite 1 Circular and RR No. 9-2012. and to ensure collection and payment

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Clearly. with he said procedute. the Fund merely acts as an agent of the borrowers- mortgagors. Thus. t innot invoke its tax exemption under Section 19 of RA No. 9679 in order not to withh:-Id and collect the taxes due on the Sale of the Foreclosed Properties during public aucti ns It must be einphasized that the Fund is not the entity liable to pay tax. but it is requirs J : , withhold and remit to the Bureau the withheld taxes relating to the sale of the Foreclos d P'roperties.

2. Sale of Acquired Prcperties

Sale of Acqui ed Properties to a third party' via a public auction is governed by Fund Circular No. 428.

RMC No. 6-2012. tl : I und. and its"aissets and properties. including. for the avoidance of Pursuant to S :ct on 19 of RA No. 9679 as circularized by RMC No. 43-2011 and

doubt. the Acquired I ror:erties. are exempt from any tax. assessment. fee. charge. or customs or imnort duty. to w'it

"SECTION 19 E. emptiou from Tax. Legul Process and':Lien. - - All laws to the

collected and u'I ..'cruals thereto und income or investmer't earnings therefrom. as persons entitle: th -reto, except io pay any debt of the member to the Fund. No tax measure _of wh tc er nuture eni ied shall apply_to the Fund. unless it expressh revokes the dec r: ipolicyof the State in Section 2 hereot kranting tax exemption to Coutrury notwit ist mding the Fund and all its ussets and properties, all contributions well as all supy lic: , equipment, pupers or documents shall he exempt from_any tax. assessment. fee ch irge, or customs or import duty: and all ienefit payments made hy the Pag-IBIG F m. shull likewise he exempt from all kinds of taxes. fees or charges. und shall not h. li. hle to attachntents. garnishments, lery or seizure by or under any legal or equitat 'e :rocess whatsoever, either before or afier receipt by the person or

the.Fund...An -I ix assessmeut. against_the Fumd _shall he.null and_.oid. {Underscoring : ip! lied}

In view of the to: egoing. this Gffice hereby confirms that the sale by the Fund of the Aequired Properties art exempt from any tax. assessment. fee. or charges without prejudice to the existing laws. ruies and regulations. Take note however, that the DST relating to such sale shall be paid by th-- third-party buyer pursuant to Section 173 of the Tax Code.

Moreover. the :hi -d-party buyer of the Acquired Properties shail be responsible for the transfer of the relev :nt title in his favor and shall shoulder the corresponding transfer costs. and other related exten -es pursuant to: Section VI (3.2) of Citcular No. 428, to wit:

ITMECHANI 'S

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Documentu. +. .n the Sule of Pag-IBIG Fund Acquired Assets

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Omnihus Giuidelines on t e tle of Pag-IBI( j und Real and Other Properies Acquired. July 31. 2019 L

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3.2 A D eu -1 Ahsolute Sule shall he issued to the huver upon full payment of .oths r. Juted expense s. " (Underscoring supplied) title in vis fuvor und shall shoulder the corresponding transfer costs, and the -m -hase price. Said huver shall be responsible for the transfer of the

the pay ment of the t: x : r penalty. to ivit: provides that no cre tit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing with he Coinmissioner a claim for credit or refund within two (2) years after approval of RMC N . -:3-2011. please note that Sections 2(04 (C) and 229 of the Tax Code With regard to th.: request for refund of all the payments it made froin the time of the

(Credit Taxes. -.h ( 'onmissioner nta. "SEC. 204. Au: H : h' of the Commissioner to Compromise. Abate and Refund or

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change unused tusps that have heen rendered unfit for use and refund their value upon proot of d. st! ietion. No credit or refund of taxes or penalties shall be allowed refund within I o Ei vears _after the pa'ment of the tux or penalt Prorided. imposed withou. du horit. refund the vulue of internal rerenue stamps when they' are returned in go: t .ondition by the purchuses. and, in his discretion, redeem or uuless_the taxp. Ye. _files in uriting with_the Commissioner a claim_for credit or Written claim fot .r .dit or refumd. tC) Credit or r tid tuxes errore:usly or illegally received or penalties illegally howeer. That I turn filed showing an overpayment shall he considered as a

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proceeding shal h. maintuined in omy court for the recoveryi of any national internal revenue tax he: -a! er alleged to huve heen erroneously or illegally assessed or collected. or ot m penaln: claimed to hune been collected w'ithout authority, or ol SEc. 229. Rec re v of Tax Erroneoushy or Illegally collected. - No suit or

uny sun allege: t. have been excessively or in any manmer w'rongfully collected. until a cluim for 'et nd or credit hgs been dib filed yith the Commissioner:.

In an case_no. ue ! suit or proceeding shall be filed after the expiration of two (?) yeurs from the : u' of pament of the tax or penalt regurdless of any supervening Cuuse that ma)'t is:..ufter payment..." (U'nderscoring supplied)

claims for refund. It ve: rs stressing that in an administrative claim for refund. the same shall Section 204 ap olits to administrative claims for refund. while Section 229 to judicial

be filed with the C R within the prescribed period and supported by source documents required under exis in:: laws and rules and regulations.: Also, it is essential that an administrative claim he filed as a condition precedent in order: for a judicial claim for refund to prosper.1

Actions for tax ret:ind or credit are in the nature of a claim for exemption. As such. the law is not only con: :ru-d in strictissimi juris against the taxpayer. the pieces of evidence presented entitling a aspayer to an exemption must also be strictissimi scrutinized and duly proven. The burden is on the taxpayer to show that he has strictly complied with the

Aeon Credit Service ( hil rpinest. Inc. M Commissioner ot Internal Revenue. C.T.A. Case No. 9770 (Resolution}. Januars +. 20

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conditions for the : ra:it of the tax refund or credit. Since taxes are the lifebiood of the

be liberally construe i.: government. tax lay s t.iust be faithfully and strictly implemented. They are not intended to

Accordingly. i the absence of proof that the Fund has filed with the CIR a claim for

can no longer be the su'nject of a refund or credit. I2 tax credit or refund vithin the two (2 year period as prescrihed by law. the taxes it had paid

Please be guid d tecordingly

Very truly yours.

urO

Commissioner of Internal Revenue CAESAR R. DULAY 051877

G Copy furnished.

Hoilo Cin. MAHINARDO G. M I IG Regional Director Revenute Region No. I

No. 54-2014 on Processin: o1 Claims for Issuance of Tax Refund TCC in Relation to Amendments Made in NIRC of 1997. as Amende. h. RA No. 10963. P'ebruary 27. 2018. : Coca-Cola Bottlers Ph: ipr'nes. Inc. s. Coinmissioner of Internal Revenue. G.R. No. 221694 (Notice). " Revenue Memorandum ( ire Iar No. 017-2018. Amending RMC No. 89-2017 and Certain Prov isions of RMC January 19. 2021