BIR Ruling [DA-386-98]

August 24, 1998 BIR RULING [DA-386-98] Dolina Property Ventures, Inc. Prince Plaza, Room 409 106 Legazpi St., Legaspi Village Makati City Attention: Mr . Nestor P . Dolina President Gentlemen : This refers to your letter dated August 4, 1998 requesting in effect for a modification of BIR Ruling No. DA-377-97 dated November 12, 1997 issued in your favor which failed to explain in details the tax incentives of a socialized housing project registered with the Housing and Land Use Regulatory Board (HLURB) pursuant to Republic Act No. 7279, otherwise known as Urban Development and Housing Act of 1992. aisadc It is represented that Dolina Property Ventures, Inc. is a real estate developer engaged in the development of low-cost and socialized housing projects; that it is a registered member of the Chamber of Real Estate & Builders Association, Inc. (CREBA);that it has a subdivision and socialized housing project at Marasbaras, Tacloban City called Villa Dolina Subdivision covered by Transfer Certificate of title No. T-42049 of the Registry of Deeds for Tacloban City; that the said subdivision is registered with the HLURB under Certificate of Registration No. CR-97-031 dated July 1, 1997 pursuant to BP 220, RA 7279, EO 648 and EO 90; that it is selling a total number of 154 socialized house and lot packages at a price of P150,000.00 under License to Sell No. LS-97-022 dated July 1, 1997; and that you are aware that your sale of low cost housing units at P375,000.00 per unit are taxable. In reply, please be informed that pursuant to Section 20 of R.A. No. 7279, pertinent portion of which reads: "SEC. 20. Incentives for Private Sector Participating in Socialized Housing . To encourage greater private sector participation in socialized housing and further reduce the cost of housing units for the benefit of the underprivileged and homeless, the following incentives shall be extended to the private sector: xxx xxx xxx (d) Exemption from the payment of the following: (1) Project-related income taxes; (3) Value-added tax for the project contractor concerned xxx xxx xxx" the owner of the raw land is exempt from the payment of capital gains tax on the conveyance of the said property for use in the aforesaid socialized housing project. Upon application for exemption, a lien on the title of the land shall be annotated by the Register of Deeds, having jurisdiction over the property, to the effect that the said property is to be applied or is being applied to socialized housing project pursuant to R. A. No. 7279. On the other hand, since you are registered with and certified by the Housing and Land Use Regulatory Board (HLURB) as engaged in socialized housing project pursuant to R. A. No. 7279, as developer of the properties used for the aforementioned socialized housing projects, the sale of the socialized housing units (house and lot or lots only) shall be exempt from project-related income taxes, and creditable expanded withholding tax prescribed under Revenue Regulations No. 2-98 implementing Section 50(B) of the Tax Code of 1997. It shall be understood that to be tax-exempt, the selling price per lot or house and lot shall not exceed P150,000.00, in accordance with Revenue Regulations No. 9-93 implementing R. A. No. 7279 [pursuant to Section 5.1 of Memorandum of Agreement on Housing Finance entered into by and between the Housing and Urban Development Coordinating Council (HUDCC), and Department of Finance (DOF), Department of Budget and Management (DBM), the Government Service Insurance System [(GSIS), the Home Development Mutual Fund (Pag-IBIG), the National Home Mortgage Finance Corporation (NHMFC), and the Social Security System (SSS)](BIR Ruling No. 21-97 dated March 3, 1997). Furthermore, under Revenue Regulations No. 11-97, within six (6) months after the issuance of tax exemption from the capital gains tax or creditable withholding tax, the buyer/developer of raw land shall apply with the HLURB or Local Government Unit (LGU) concerned for a permit to develop the property and shall start the development of the socialized housing project within one (1) year after the approval of the development plan and issuance of permit. Otherwise, the exemption from the capital gains tax or creditable withholding tax becomes automatically null and void, and the buyer/developer shall be held liable for the payment of taxes that should otherwise have been paid, plus the penalties incident to late payment. Provided, further, that in case of misrepresentation, an additional penalty equivalent to one hundred (100%) percent of the capital gains tax or creditable withholding tax due shall be imposed and paid by the buyer/developer. In this connection, any sale made by your company to interested parties other than the principal target beneficiaries under Sections 3(t) and 16 of R. A. No. 7279, shall not be entitled to the foregoing tax exemption, should there be non-compliance with any of the sine qua non terms and conditions as aforestated, for tax exemption purposes. 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 valuation of real property, the actual selling price per sale transaction of the units in this case does not really exceed P150,000.00. On the other hand, the contractor of the socialized housing units under R. A. No. 7279 is exempt from the payment of value-added tax pursuant to the aforecited provision. However, purchases of goods/articles by the project contractor shall be subject to value-added tax, even if the said purchases are to be used for the socialized housing project. However, it is observed that documentary stamp tax is not one of the taxes covered by the tax exemption clause in Sec. 20 of R. A. No. 7279. Such being the case, as project developer/seller, your company shall be liable to pay the documentary stamp tax on the documents conveying the property imposed under Sec. 196 of the Tax Code, as amended, based on the actual consideration paid to it. (BIR Ruling No. 393-93 dated October 1, 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. LLjur This modifies BIR Ruling No. DA-377-97 dated November 12, 1997. Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group