BIR Ruling [DA-243-06]

April 12, 2006 BIR RULING [DA-243-06] BIR Ruling No. DA-064-04 Blas Roque Home Owners Association, Inc. #595 Blas Roque St. Barangay Bagbag, Novaliches Quezon City Attention: Mr. Henry C. Fabon President Gentlemen : This refers to your letter dated March 30, 2006 indorsed to this Office by Director Aurora C. Sabares of the Presidential Action Center requesting for a ruling that the proposed transfer/subdivision of parcels of land situated in Bagbag, Quezon City to be purchased under the name of Blas Roque Home Owners Association, Inc. ("BRHAI" or "Association") and covered by TCT No. 195540 and TCT No. RT-57308 (131192) issued by the Registry of Deeds of Quezon City in favor of BRHAI's member-beneficiaries under the provisions of Republic Act (R.A.) No. 7279, is exempt from taxes. Documents show that BRHAI is a non-stock, nonprofit association of underprivileged and homeless citizens organized on October 27, 1999. It is registered with the Home Insurance and Guaranty Corporation. Pursuant to Section 36 of R.A. No. 7279, otherwise known as the "Urban and Development Housing Act of 1992," BRHAI is securing a housing loan under the Community Mortgage Program (CMP), a financing assistance program of the Social Housing Finance Corporation (SHFC), a subsidiary of the National Home Mortgage Finance Corporation, for the acquisition of the aforementioned lots that its qualified member-beneficiaries occupy. In reply, please be informed that the proposed transfer in favor of BRHAI's 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 or the creditable withholding tax imposed under Revenue Regulations No. 2-98, as amended, implementing Section 57(A) of the same Code, considering that the said transfer of BRHAI's properties is without monetary consideration since it is merely a formality to finally effect transfer of the said properties to its member-beneficiaries who actually bought the same from the former owners through the Association. In other words, the transfer is without any consideration because BRHAI is in fact transferring the ownership of the properties which actually belong to the member beneficiaries. Furthermore, the said transfer is not subject to the donor's tax imposed under Section 99 of the Tax Code of 1997 since there is no intention on the part of the Association to donate the said property to said members considering that the Association could not donate property which belongs to themselves (members-beneficiaries). However, it is noted that under Section 196 of the Tax Code of 1997, the deeds or documents subject to the documentary stamp tax (DST) 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 properties in favor of BRHAI's member-beneficiaries is not subject to the DST imposed under Section 196 of the Tax Code of 1997. However, the notarial acknowledgment to said deeds of conveyance is subject to the DST of PhP15.00 pursuant to Section 188 of the same. Code. 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. DHITcS Very truly yours, Commissioner of Internal Revenue By: (SGD.) PABLO M. BASTES, JR. OIC-Head Revenue Executive Assistant Legal Service