Mr. Norman P. Sampal

November 29, 2007 BIR RULING [DA-606-07] 22 (B) DA-047-2004 Mr. Norman P. Sampal Basud, Polangui Albay S i r : This refers to the 1st Indorsement dated July 19, 2007 of Atty. Edmund P. Lladoc, Chief, Legal Division, Revenue Region No. 10, Legaspi City, relative to your request for exemption from the payment of taxes on the sale of your real property to the Municipal Government of Polangui to be used as site of the Local Government Unit housing project. aIEDAC Documents submitted disclosed that Norman P. Sampal, landowner, is the absolute and registered owner of a parcel of land situated along a barangay road, more or less 300 meters, from the Provincial road and 4.5 kms. from the Poblacion and trading center of the municipality of Polangui, Albay; that the portion intended to be used as site of the housing project is adjacent to a military camp and the elementary and high school campus of Lanigay, Polangui, Albay; that a deed of absolute sale containing a negotiated amount of P10,000,000.00 or a price of P250.00 per square meter for portion of Lot No. 11843 containing an area of 40,000 square meters was already executed between the contracting parties; that the negotiated price was found reasonable by the Committee as the prevailing price of lands in the area reaches up to P300.00 per sq. meter. In reply, please be informed that Section 20 of Republic Act No. 7279 reads: "Sec. 20. Incentives for Private Sector Participating in Socialized Housing . To encourage greater participation in socialized housing, and further reduced 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) . . . "(2) Capital gains tax on raw lands used for the project;" The owners of the raw lands are exempt from the payment of capital gains tax on the conveyance of the property, corresponding to the portion thereof that will be used in the aforestated socialized housing project. Upon application for exemption, a lien on the titles of the lands shall be annotated by the Register of Deeds having jurisdiction over the properties, to the effect that the same are being applied to socialized housing project pursuant to RA No. 7270. However, the sale is subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997, based on the consideration or the fair market value, whichever is higher. Furthermore, under Revenue Regulations No. 11-97, within six (6) months after this 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 Permit 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 percent (100%) of the capital gains tax or creditable withholding tax due shall be imposed on and paid by the buyer/developer. CIDcHA In this connection, any sale made by the developer to interested parties other than the principal target beneficiaries under Sections 3 (t) and 16 of RA 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 P300,000.00. Thus, sale of a unit above the maximum amount shall be subject to the corresponding internal revenue taxes. However, it is observed that documentary stamp tax is not one of taxes covered by the tax exemption clause is Section 20 of RA No. 7279. Such being the case, the project developer/sellers shall be liable to pay the documentary stamp tax on the documents conveying the properties imposed under Section 196 of the Tax Code of 1997, based on the consideration contracted to be paid for such realties or on their fair market value determined in accordance with Section 6 (E) of the said Code, whichever is higher. Furthermore, the transfer of title of the said property from the developer to the beneficiaries is subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. However, the notarial acknowledgement 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. 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. HIaSDc Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service