BIR Ruling [DA-160-05]

April 14, 2005 BIR RULING [DA-160-05] R.A. No. 9243 Mrs. Florentina D. Magbitang Cristina Homes II Kalikid Sur, Cabanatuan City M a d a m : This refers to your letter dated November 2004 requesting for a ruling exempting you from the payment of documentary stamp tax (DST) on the Loan Agreement/Deed of Assignment executed by you and the Home Development Mutual Fund (HDMF). Documents show that you are the owner and developer of Florentina Magbitang Enterprises with principal office at 83 Maestrang Kikay District, Maharlika Highway, Talavera, Nueva Ecija; that you and the Home Development Mutual Fund executed separate Deeds of Assignment with Special Power of Attorney (With Buyer's Conformity) whereby the HDMF accredited Cristina Homes II, a project of Florentina D. Magbitang, for participation in the Pag-IBIG Housing Loan Program; that all the condominium units/individual lots including the improvements thereon situated in the Project are owned by and registered in your name who has full authority to mortgage, to enter into conditional purchase or contract to sell with Pag-IBIG members-buyers and/or to assign said Contract to Sell; that the borrower-buyers' housing loan applications were approved by the HDMF under the Consolidated Guidelines of the Pag-IBIG Housing Loan Program; that pursuant to the Funding Commitment Agreement, the parties have agreed that upon loan take-out, the amount equivalent to the loan value of the residential property subject of the Contract to Sell (CTS) executed between Florentina D. Magbitang and the borrower-buyers shall be released by the HDMF to Florentina D. Magbitang and the payment thereof, during the two-year guaranty period and pending conversion of the said CTS into Real Estate Mortgage, shall be secured by an assignment of the said CTS in favor of the HDMF; that the amount of loan granted by HDMF varies, some are below P250 Thousand and the others exceed the same; and that in consideration of the amount stated in the Deed of Assignment with Special Power of Attorney (With Buyer's Conformity), Florentina D. Magbitang assigned, transferred and conveyed unto the HDMF the CTS executed by Florentina D. Magbitang and the borrower-buyers. In reply, please be informed that Section 199(d) of the Tax Code of 1997 provides, viz: "Section 199. Documents and Papers Not Subject to Stamp Tax . The provisions of Section 173 to the contrary notwithstanding, the following instruments, documents and papers shall be exempt from the documentary stamp tax: (a) . . . (b) . . . (c) . . . (d) Loan agreements or promissory notes, the aggregate of which does not exceed Two hundred fifty thousand pesos (P250,000), or any such amount as may be determined by the Secretary of Finance, executed by any individual for his purchase on installment for his personal use or that of his family and not for business or resale, barter or hire of a house, lot, motor vehicle, appliance or furniture; Provided, however, That the amount to be set by the Secretary of Finance shall be in accordance with a relevant price index but not to exceed ten percent (10%) of the current amount and shall remain in force at least for three (3) years." In view of the foregoing, only loan agreements/Deeds of Assignment with Special Power of Attorney (With Buyer's Conformity), where the aggregate amount of loan do not exceed Two hundred fifty thousand pesos (P250,000.00) per loan agreement are exempt from documentary stamp tax. In other words, where the amount of loan exceeds Two hundred fifty thousand pesos (P250,000.00) per loan agreement, the document is subject to documentary stamp tax. TAacHE This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered as null and void. Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group