BIR Ruling [DA-126-05]

April 6, 2005 BIR RULING [DA-126-05] R.A. 7279 S-32-024-2001 Mr. Anthony W. Canizares Sapphire St., Celina Homes Camarin, Caloocan City S i r : This refers to your letter dated August 31, 2004, representing yourself to be a bona fide member of the QC Ville 1 Homeowners Association, Inc.,a non-stock, non-profit Homeowners Association primarily incorporated for the purpose of applying for the Group Land Acquisition and Development (GLAD) program of the Home Mutual Development Fund (PAGIBIG);that the purpose of the GLAD program of PAGIBIG is to help Homeowners Association finance the land acquisition and development into a low cost housing community for all its members in order to do away with housing developers by lessening the cost of the development; that you now like to transfer the TCT of the assigned lot from QC Ville 1 Homeowners Association, Inc.,to yourself; that you also represented that a Deed of Assignment covering a particular lot was executed in favor of the individual member who has been paying the amortization and interest since the start of the development and construction of the housing project. In connection therewith, you now request if all the beneficiaries or bona fide members of QC Ville 1 Homeowners Association are required to pay Capital Gains Tax (CGT) when transferring the TCT of the lot from the name of QC Ville 1 Homeowner Association.,Inc. to its individual members even though there is no selling transaction or Deed of Sale that occur between the association and its members. In reply, please be informed that the transfer in favor of the individual member-beneficiaries of the said subdivided property is not subject to either the capital gains tax imposed under Section 24(D)(1) of the Tax Code of 1997 or the creditable withholding tax imposed under Revenue Regulations No. 2-98, as amended, implementing Section 57(B) of the same Code, considering that the said transfer of the property is without any consideration since it is merely a formality to finally effect the transfer of the said property from the Association to the member-beneficiaries who actually bought the same. In other words, the Association is in fact transferring the ownership of the property to the member-beneficiaries who actually own the same. aTEADI It is, however, understood that the Certificate Authorizing Registration (CAR) shall only be issued after it is established upon proper verification by the Revenue District Officer (RDO) concerned that, considering the rules on evaluation of real property, the actual selling price per sale transaction of the lots in this case does not really exceed P150,000.00 or P180,000.00, (now P225,000.00 per HUDCC Memorandum No. 02, Series of 2002 dated October 21, 2002) as the case may be, for each qualified beneficiaries. Moreover, the said transfer is not subject to the donor's tax imposed under Section 99 of the Tax Code of 1997, considering that the Association could not donate a property the ownership of which belongs to the transferees (member-beneficiaries) themselves. Furthermore, the transfer of title of the said property in favor of the member-beneficiaries is not subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. However, the notarial acknowledgment to said deed of conveyance is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the Tax Code of 1997. (BIR Ruling No. S-32-024-2001 dated May 30, 2001) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group