The Bureau of Internal Revenue (BIR) today filed a criminal complaint with the Department of Justice against VIRKAR REALTY CORPORATION (VIRKAR) and its President NORA A. BITONG and Treasurer REYNALDO A. BITONG for two (2) counts of willful attempt to evade or defeat tax, one (1) count of deliberate failure to supply correct and accurate information in its Income Tax Return (ITR) and one (1) count of deliberate failure to file to supply correct and accurate information in its Value Added Tax (VAT) Return for taxable year 2008, all in violation of Section 254, Section 255 and Section 256 of the National Internal Revenue Code of 1997, as amended (Tax Code).
VIRKAR (formerly KRONBI REALTY CORPORATION) is a domestic corporation engaged in the real estate business with office address at 2nd Floor, Building I, Jannov Plaza, 2295 Pasong Tamo Extension, Makati City.
The investigation of VIRKAR stemmed from the sale on June 26, 2008 of a commercial real property located at Jupiter-Canopus Streets, Bel-Air Village, Makati City between then KRONBI REALTY CORPORATION and JUPITER STREET PROPERTIES and DEVELOPMENT CORPORATION.
Investigation showed that the sale of the said real property was subjected to the 6% Expanded Withholding Tax (EWT). However, the sale was not declared as part of the gross sales for taxable year 2008 of then KRONBI REALTY CORPORATION 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 P6.59M payment of EWT and not CGT (ZV-P109.85M/SP-P55.62M).
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% that allowed VIRKAR to lessen its income tax and VAT liabilities and constitutes a prima facie case of fraud.
VIRKAR was assessed an estimated aggregate tax liability for taxable year 2008 amounting to P83M, inclusive of surcharge and interest, broken down into Income Tax of P54.13M and VAT of P28.87M.
The case against VIRKAR REALTY CORPORATION (VIRKAR) and its President NORA A. BITONG and Treasurer REYNALDO A. BITONG is the ninety-sixth (96th) filed under the Run After Tax Evaders (RATE) program of the BIR under the leadership of Commissioner Kim S. Jacinto-Henares.