Alpadi Development Corporation

September 15, 2008 BIR RULING [DA-(C-062) 214-08] BIR Ruling No. 028-93 & S-20-037-06 Alpadi Development Corporation 10th Floor, Manufacturers Building Plaza Sta. Cruz, Manila Attention: Atty. Melania C. Tijam-Ariola Gentlemen : This refers to your letter dated April 17, 2008 requesting for exemption from the payment of capital gains tax in connection with the expropriation of a parcel of land by the City of Manila for purposes of socialized housing. EIcTAD Documents submitted show that Alpadi Development Corporation ("Alpadi" for brevity) is the registered owner of that parcel of land covered by Transfer Certificate of Title No. 238755 of the Register of Deeds of the City of Manila consisting of 1,501.80 square meters, more or less situated in Lardizabal corner Jhocson Street, Sampaloc, Manila. On September 17, 2007, a Decision was rendered by the Regional Trial Court of Manila, Branch 21 expropriating the abovedescribed property pursuant to City of Manila Ordinance Number 8098, Series of 2005. The purpose of such acquisition was for resale at cost or on installment basis for a period not exceeding 20 years to qualified and bona fide tenants, residents an/or occupants thereat pursuant to the Land-for-the-Landless Program of the City of Manila. The Decision became final and executory on November 22, 2007. On April 10, 2008, the City of Manila had fully paid the just compensation for the subject property in the amount of PhP19,065,726.45. In reply, please be informed that pertinent portions of Section 20 of R.A. No. 7279, read: "Sec. 20. Incentives for the Private Sector Participating in Socialized Housing. To encourage greater 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; (2) Capital gains tax on raw lands used for the project; xxx xxx xxx" (Emphasis added) Based on the foregoing provisions, Alpadi, the landowner of the real property used in the socialized housing project of the City of Manila, is exempt from the payment of project related income taxes, and consequently, from withholding tax on the conveyance of the real property to the City of Manila or to the intended beneficiaries. However, any sale made to interested parties other than the principal target beneficiaries under Section 3 (t) and 16 of R.A. No. 7279, shall not be entitled to the foregoing tax exemption. TcADCI It is observed that documentary stamp tax is not one of the taxes covered by the tax exemption clause under Sections 20 and 32 of R.A. No. 7279. Such being the case, the landowner, Alpadi is liable to pay the documentary stamp tax on the document conveying the property to the City of Manila as imposed under Section 196 of the Tax Code, as amended, based on the actual consideration paid by the City of Manila to Alpadi. Upon registration of the executed documents of sale between Alpadi and the City of Manila, a lien on the Certificate of Title of the lot to be issued in the name of the City of Manila shall be caused to be annotated by the Register of Deeds having jurisdiction over the properties, to the effect, that the said property is actually used for socialized housing pursuant to R.A. No. 7279. (BIR Ruling No. S20-024-2006 dated June 28, 2006) However, please take note that this ruling is never intended and shall not be construed as giving authority to the concerned Register of Deeds to effect transfer of the land title in the name of the buyer without the necessary certificate of authority to register issued by this Bureau. In this regard, this ruling shall be presented to the Revenue District Office (RDO) concerned in order for the latter to issue the Certificate Authorizing Registration (CAR) without the payment of the capital gains tax on the transfer of the subject realty to the City of Manila. 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. CTSAaH Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service