BIR Ruling [DA-218-99]

April 12, 1999 BIR RULING [DA-218-99] Purok 20 Homeowner's Agri-Development & Community Association, Inc. Nazarene Ville, Barangay San Roque Antipolo, Rizal Attention: Mr . Roberto D . A . Gamboa President Gentlemen : This refers to your letter dated December 3, 1998 requesting for a ruling that no gain or loss is recognized on the transfer/subdivision and awarding of the parcels of land registered in the name of the Association, which acted merely as facilitator under the Community Mortgage Program (CMP) program of the government and loans by its member-beneficiaries, to the concerned member-beneficiaries, the actual property-owners, who are underprivileged and homeless, under the provisions of R.A. 7279, and therefore, exempt from the corporate income tax, and from the creditable withholding tax imposed under Revenue Regulations No. 2-98. It is represented that Purok 20 Homeowner's Agri-Development & Community Association, Inc. is duly registered with the Securities and Exchange Commission (SEC); that serving as a facilitator, and through the CMP Program of the government, it acquired by virtue of loan from the National Home Mortgage Corporation (NHMFC), a parcel of land situated at barangay San Roque, Antipolo Rizal; and that it has subdivided the said property into homelots and distributed to its member-beneficiaries. In reply, please be informed that the transfer in favor of your 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. 1-90, as amended by Revenue Regulations No. 2-98, implementing Section 57(A) of the same Code, considering that the transfer of said property is without any consideration since it is merely a formality to finally effect transfer of the said property to your member-beneficiaries who actually bought the same from the former owner through your Association. In other words, the transfer is without any consideration because you are in fact transferring the ownership of the property which actually belong to the member-beneficiaries. Furthermore, the said transfer is not subject to the donor's tax imposed under Section 93 of the Tax Code of 1997, since there is no donative intent or intention on your part to donate the said property to said property to said member-beneficiaries, considering that you could not donate property the ownership of which belong to the donees (member-beneficiaries) themselves. However, it is noted that under Section 196 of the Tax Code of 1997, 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 purchaser 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, the transfer of title of the said property in favor of your 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. CMP 171-98, dated September 16, 1998, citing BIR Ruling No. 398-93 dated October 11, 1993) 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.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)