Makawili Homeowners Association Inc.

September 14, 2007 BIR RULING [DA-493-07] R.A. No. 9243 Makawili Homeowners Association Inc. Brgy. 167, Llano Caloocan City Attention: Mrs. Helen L. Vicente President Gentlemen : This refers to your letter dated May 30, 2007 requesting exemption from the payment of documentary stamp tax (DST) on the transfer of several parcels of land in favor of member-beneficiaries of your community association. As represented, Makawili Homeowners Association Inc. ("the Association" for brevity) is a non-stock, non-profit corporation registered with the Housing and Land Use Regulatory Board under Certificate of Registration No. 09585 issued on December 16, 2003. On October 24, 2005, the Association representing 305 beneficiaries acquired by way of a loan in the amount of PhP18,300,000.00 under the Community Mortgage Program (CMP) of the National Home Mortgage Finance Corporation (NHMFC) that real property covered by Transfer Certificate of Title No. C-379769 located at Brgy. 167, Llano, Caloocan City with Makawili Jay C Foundation as originator. In reply, please be informed that Section 185 of Regulations No. 26, otherwise known as the Revised Documentary Stamp Tax Regulations, implementing Title VII of the Tax Code, provides that conveyances of realties not in connection with a sale, to trustees or other persons without consideration are not taxable. Accordingly, the deed to be executed by the Association to effect the aforesaid transfer in favor of its member-beneficiaries is not subject to the documentary stamp tax imposed under now 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 PhP15.00 pursuant to Section 188 of the same Code. Moreover, Section 199 (d) of the Tax Code of 1997 as amended by Republic Act (R.A.) No. 9243 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: CacTIE xxx xxx xxx (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. xxx xxx xxx" It appears from the foregoing provision of law that it is likewise the intention of Congress to exempt the mortgage arising from the loan agreement from DST considering that the beneficiaries of Republic Act No. 7279 are the underprivileged and homeless and loan agreements are usually secured by the property (lot) bought using the loan. 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 lots in this case does not really exceed PhP150,000.00 or PhP180,000.00, (now PhP225,000.00 per HUDCC Memorandum No. 02, Series of 2002 dated October 21, 2002) as the case may be, for each qualified beneficiaries. In view of the foregoing, the mortgage is not subject to DST pursuant to Section 199 (d) of the Tax Code of 1997 as amended by R.A. No. 9243. 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.) JAMES H. ROLDAN Assistant Commissioner Legal Service