Fake deed of absolute sale to avoid paying tax

The Bureau of Internal Revenue (BIR) today filed a criminal complaint with the Department of Justice against LERMA S. LASALA (LASALA) and FIRST FLEMMING PROPERTIES, INC. (FIRST FLEMMING) for acts or omissions in violation of the National Internal Revenue Code of 1997, as amended (Tax Code).

Lasala was charged for willful attempt to evade or defeat tax, failure to file Income Tax Return (ITR) and Value Added Tax (VAT) return, and failure to supply correct and accurate information in her Capital Gains Tax (CGT) return and Documentary Stamp Tax (DST) return for taxable year 2008 under Sections 254 and 255 of the Tax Code.

On the other hand, First Flemming and its President/Director FLEMMING REMMER and Corporate Secretary ANNBRIT CHANET REMMER, were charged for willful attempt to evade or defeat tax, failure to file VAT returns and Expanded Withholding Tax (EWT) returns and failure to supply correct and accurate information of its income for taxable year 2008 under Sections 254 and 255 of the Tax Code.

The investigation was triggered by a confidential information received by the BIR on the alleged tax evasion schemes perpetrated by First Flemming.

Investigation showed that a Deed of Absolute Sale was executed June 17, 2008 wherein Lasala sold to First Flemming two (2) “residential lots” located in Brgy. Sto. Niño, Puerto Galera, Oriental Mindoro covered by TCT No. T-142879 and TCT No. T-139185 with an area of 700 sq.m. and 1,000 sq.m., respectively, for a selling price of only P100,000.00. Based on the said consideration, CGT of P71,400.00 and DST of P17,850.00 were paid by Lasala to BIR. A Certificate Authorizing Registration (CAR) was thus issued by BIR paving the way for the issuance of new titles covering said lots by the Register of Deeds of Calapan City.

Investigators, however, discovered that the said transaction was tainted with fraud. The actual selling price of the subject lots was P13.8 million as reflected in a Deed of Absolute Sale earlier executed by both Lasala and First Flemming on June 14, 2008.

Furthermore, the lot covered by TCT No. T-139185 was actually commercial and not residential as declared by both respondents. The subject lot being an ordinary asset, the EWT of 6% should have been withheld by First Flemming. Lasala, on her part, should have declared the proceeds of the sale as her income subject to income tax and VAT for taxable year 2008.

Moreover, First Flemming failed to report the purchase of said lots in its financial statements, giving rise to an undeclared income subject to income tax which should have been declared in its ITR. The amount of P13.8 million used to buy the said lots is an asset which should have reported in its 2008 financial statements as additional property. Such failure gave rise to undeclared income constituting prima facie evidence of fraud tantamount to tax evasion.

Consequently, Lasala was assessed a total deficiency tax liability of P8.93 million, inclusive of surcharges and interests, broken down into: Income Tax – P5.68 million; VAT – P2.21 million; CGT – P0.61 million; and DST P0.43 million. First Flemming, on the other hand, was assessed an aggregate deficiency tax liability amounting to P15.08 million, inclusive of surcharges and interests, broken down into: Income Tax – P10.22 million; VAT – P3.75 million; and EWT – P1.11 million.

The case against LERMA S. LASALA and FIRST FLEMMING PROPERTIES, INC., together with its President/Director FLEMMING REMMER and Corporate Secretary ANNBRIT CHANET REMMER, is the 107th filed under the Run After Tax Evaders (RATE) program of the BIR under the leadership of Commissioner Kim S. Jacinto-Henares.