BIR Ruling [DA-563-98]

December 11, 1998 BIR RULING [DA-563-98] The Revenue District Officer Revenue District No. 101 Iligan City S i r : This refers to your letter dated May 14, 1998 concerning your request for information as to the basis of the documentary stamp tax on deeds of conveyance of real property, pursuant to Section 196 of the NIRC, in relation to the facts herein presented. casia It is represented that JOHNDORF VENTURE CORPORATION is habitually engaged in the real estate business, being a developer and seller of socialized housing units to qualified beneficiaries as certified by the Housing and Land Use Regulatory Board (HLURB); that it submitted Documents of Sale, with attachments, for processing and issuance of the required Certificate Authorizing Registration (CAR); that each Document of Sale involves subdivided individual lots with more or less an area of 100 square meters for ownership titling in favor of the end buyer which will be used as collateral to secure loan from PAG-IBIG; that the said Document of Sale showing a consideration of P30,000 failed to mention/include the residential unit; that the aforesaid consideration of P30,000 is admittedly lower than the correct amount of housing loan individually applied for as shown in the Certificate of Loan Eligibility (CLE) issued to prospective beneficiary/end-buyer in the amount of P180,000; that the said amount of P180,000 includes the costs of the housing unit. In reply, please be informed that the Home Development Mutual Fund (HDMF), otherwise known as the PAG-IBIG, created under Presidential Decree No. 1752, is an implementing arm of the Government to finance its housing program. In a nutshell, PAG-IBIG provides financing for socialized and low cost housing units offered by real estate developers and sold to the general public. Thus, in the foregoing illustration, the unit buyer, in effect, actually purchased from the real estate developer a piece of house and lot at a cost of P180,000 which, in turn, the said buyer mortgaged with PAG-IBIG for the same amount of P180,000 to pay his obligation to the said developer. Under Section 196 of the National Internal Revenue Code, as amended by R.A. No. 8424, the documentary stamp tax on deeds of sale and conveyances of real property shall be " based on the consideration contracted to be paid for such realty or on its fair market value determined in accordance with Section 6(E) of this Code, whichever is higher . . . ." In view of the foregoing, the documentary stamp tax on the deed of conveyance of the aforesaid real property shall be based on the consideration of P180,000 or on the fair market value thereof determined pursuant to Section 6(E) of the Tax Code of 1997, whichever is higher . aisadc This ruling supersedes all previous rulings inconsistent herewith. Very truly yours, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue