The Bureau of Internal Revenue (BIR) yesterday filed a criminal complaint with the Department of Justice (DoJ) against Virkar Realty Corp. (Virkar) and its officials.
Virkar and its president Nora Bitong and treasurer Reynaldo Bitong were charged for two counts of willful attempt to evade or defeat tax, one count of deliberate failure to supply correct and accurate information in its income tax return (ITR) and one count of deliberate failure to file to supply correct and accurate information in its value added tax (VAT) return for taxable year 2008.
The BIR said all the charges are in violation of Section 254, Section 255 and Section 256 of the National Internal Revenue Code of 1997, as amended.
Virkar (formerly Kronbi Realty Corp.) is a domestic corporation engaged in the real estate business with office address at 2nd Floor, Bldg. I, Jannov Plaza, 2295 Pasong Tamo Ex., Makati City.
The case stemmed from the sale on June 26, 2008 of a commercial real property located at Jupiter-Canopus Sts., Bel-Air Vill., Makati between then Kronbi Realty and Jupiter Street Properties and Dev’t Corp.
Investigation showed that the sale of the said real property was subjected to the 6 percent expanded withholding tax (EWT). However, the sale was not declared as part of the gross sales for taxable year 2008 of Kronbi Realty for the purpose of computing the correct tax.
Instead, it was declared in its 2008 ITR as income already subjected to capital gains tax (CGT) to evade the payment of the correct corporate income tax and VAT.
Investigators noted that the certificate authorizing registration (CAR) issued by the BIR covering the said sales transaction reflected a P6.59 million payment of EWT and not CGT.
The subject sale being a sale of an ordinary asset by a realty corporation is subject to EWT and not to CGT. The nature of the property as an ordinary asset is reflected in the audited financial statements of Virkar and in the letter of formal offer to buy the said property where the nature of the property and the payment of VAT were discussed lengthily.
The scheme of treating the said sales transaction as subject to final tax (capital gains tax) instead of as part of gross sales resulted into an underdeclaration of income by more than 30 percent that allowed Virkar to lessen its income tax and VAT liabilities and constitutes a prima facie case of fraud.
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