Cebu Green Meadows Homeowners Association, Inc.

March 27, 2008 BIR RULING [DA-201-08] R.A. 7279; DA-032-01 Cebu Green Meadows Homeowners Association, Inc. Sitio Narra, Tayud, Liloan, Cebu Attention: Mrs. Elenita A. Solamo President/Chairwoman Gentlemen : This refers to your letter dated December 12, 2007 indorsed to this Office by Revenue Region No. 13, Cebu City, requesting for exemption from the payment of capital gains tax on the individualization and distribution of the parcels of land registered in the name of Cebu Green Meadows Housing Cooperative, now known as the Cebu Green Meadows Homeowners Association, Inc., which acted merely as facilitator under the Group Land Acquisition and Development (GLAD) Program of the government to the concerned member-beneficiaries, the actual property-owners, who are underprivileged and homeless, under the provisions of Republic Act (R.A.) No. 7279, otherwise known as the "Urban Housing and Development Act of 1992". It is represented that Cebu Green Meadows Housing Cooperative is a cooperative duly registered with the Cooperative Development Authority (CDA) created for the purpose of acquiring parcels of land for the GLAD Program; that the parcels of land it acquired and registered in its name are covered by Transfer Certificate of Title Nos. 62595, 62590, 62586, 62589, 62588, 62591, 62592, 62585 and 62594, all of the Registry of Deeds of Mandaue City, situated at Sitio Narra, Tayud, Liloan, Cebu; that for purposes of complying with the requirements of the GLAD Program, the Cebu Green Meadows Housing Cooperative was required to register with the Housing and Land Use Regulatory Board (HLURB), hence, the change in its name to Green Meadows Homeowners Association, Inc.; and that the Association has subdivided the above-mentioned properties into homelots with the respective titles to be distributed to its member-beneficiaries. In reply, please be informed that the transfer in favor of the individual member-beneficiaries of the said subdivided properties is not subject to either the capital gains tax imposed under Section 24 (D) (1) of the Tax Code of 1997, as amended, 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 transfer of said properties is without any consideration since it is merely a formality to finally effect transfer of the said properties to the member-beneficiaries who actually bought the same from the former owner through the Cebu Green Meadows Housing Cooperative, now known as the Cebu Green Meadows Homeowners Association, Inc.. In other words, the transfer is without any consideration because the Association is in fact transferring the ownership of the properties which actually belong to the member-beneficiaries. ECaTDc Furthermore, the said transfer is not subject to the donor's tax imposed under Section 98 of the Tax Code of 1997, since there is no intention on the part of the association to donate said properties to the members considering that the members of the association could not donate properties the ownership of which belong to themselves. Moreover, under Section 196 of the Tax Code of 1997, as amended, the deeds or documents subject to the documentary stamp tax imposed therein are those where the realty sold shall be granted, assigned, transferred or otherwise conveyed to a purchasers or purchasers or to any other person or persons designated by such purchaser or purchasers thereby excluding from its purview the instant case considering that no consideration is involved in said transaction upon which the tax imposed could be based. Accordingly, no documentary stamp tax shall be imposed on the transfers or distributions of the individual titles to the members-beneficiaries. However, the notarial acknowledgment to said deeds of conveyance is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the Tax Code of 1997, as amended. (BIR Ruling No. BIR Ruling Nos. 398-93 dated October 11, 1993 and DA-032-01 dated March 12, 2001) 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 null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service