BIR Ruling No. 001-12

January 2, 2012 BIR RULING NO. 001-12 RA No. 7279; BIR Ruling No. 130-10; BIR Ruling No. 040-10; BIR Ruling No. 344-11 Halik Alon Homeowners Association, Inc. Kaingin II-B Halik Alon Barangay Sto. Nio, Paraaque City Attention: Virgilio J. Acua CA President Gentlemen : This refers to your letter dated July 15, 2011, requesting for a tax exemption on the sale of real property by IDM Development and Management Corporation in favor of Halik Alon Homeowners Association, Inc. pursuant to Republic Act 7279 otherwise known as the "Urban Development and Housing Act of 1992". It appears that IDM Development and Management Corporation with Tax Identification Number 218-395-364-000, is the registered owner of a parcel of land, identified as Lot No. 1-A of the subdivision plan, Psd-00-078055 being a portion of lot 1, Pcs-00-012136, LRC Record No. 20564 covered by Transfer Certificate of Title (TCT) No. 010-2011001665 issued by the Registry of Deeds for Paraaque. The aforesaid property is situated at Brgy. Sto. Nio, Paraaque City with an area of three thousand three hundred forty three square meters (3,343 sq.m.),more or less. Halik Alon Homeowners Association, Inc. with Tax Identification Number 276-467-495-000, on the other hand, is a homeowner's organization registered with the Housing and Land Use Regulatory Board (HLURB).On July 6, 2011, the parties executed an Amended Deed of Absolute Sale whereby the owner transfers and conveys two thousand two hundred forty five and 4/100 square meters (2,245.04 sq.m.) of the subject property to Halik Alon Homeowners Association, Inc. at an agreed price of Seven Million Eight Hundred Fifty Seven Thousand Six Hundred Forty Pesos (P7,857,640.00) at Three Thousand Five Hundred Pesos (P3,500.00) per sq.m. Pursuant to a certification issued by Social Housing Finance Corporation, two thousand two hundred forty five and 4/100 square meters (2,245.04 sq.m.) of the property covered by TCT No. 010-2011001665 is actually a CMP Project and shall be proportionately distributed to the association's qualified member-beneficiaries. For this purpose, Halik Alon Homeowners Association, Inc. secured a housing loan under the Community Mortgage Program (CMP),a financing assistance program of the Social Housing Finance Corporation (SHFC) a subsidiary of the National Home Mortgage Finance Corporation (NHMFC). In reply, please be informed that pursuant to Sections 20 and 32 of RA No. 7279, pertinent portions of which state that: "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: (d) Exemption from the payment of the following: (2) Capital gains tax on raw lands used for the project; xxx xxx xxx Sec. 32. Incentives. To encourage its wider implementation, participants in the CMP shall be granted with the following privileges or incentives: xxx xxx xxx (b) Properties sold under the CMP shall be exempted from the capital gains tax; and" aEDCSI the landowners who sold their properties for use in a socialized housing project are exempt from the payment of capital gains tax. Such being the case, the sale of the aforestated property by IDM Development and Management Corporation to Halik Alon Homeowners Association, Inc. in so far as the two thousand two hundred forty five and 4/100 square meters (2,245.04 sq.m.) portion thereof is concerned is exempt from the capital gains tax . (BIR Ruling No. 130-10 dated December 1, 2010) However, the documentary stamp tax is not one of the taxes covered by the tax exemption clause in Sec. 20 of RA 7279. Accordingly, IDM Development and Management Corporation is liable to pay the documentary stamp tax on the documents conveying the afore-stated property imposed under Section 196 of the Tax Code of 1997, based on the consideration contracted to be paid for such realty or its fair market value determined in accordance with Section 6 (E) of the said Code, whichever is higher. (BIR Ruling No. 130-10 dated December 1, 2010) It is, however, understood that this ruling is never intended and shall not be construed as giving authority to the concerned Register of Deed to effect transfer of the land titles 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). The CAR shall only be issued after the submission of the requirements provided under RMO 15-2003. (BIR Ruling No. 040-10 dated August 27, 2010) Moreover, the transfer of the lots, comprising the two thousand two hundred forty five and 4/100 square meters (2,245.04 sq.m.) portion thereof, from the said association to the individual members (see Annex for the masterlist of qualified beneficiaries) thereof is not subject to either the capital gains tax imposed under Section 27 (D) (5) of the Tax Code of 1997, or the creditable withholding tax imposed under Revenue Regulations No. 2-98, as amended, considering that the said transfer/transaction is merely a formality to finally effect transfer of titles of the real properties to the member-beneficiaries who actually bought the same. Such lack of consideration does not, likewise, render the transfer subject to the donor's tax imposed under Section 99 of the Tax Code of 1997, since there is no intention on the part of the association to donate said properties to the members considering that the members of the association could not donate properties the ownership of which belongs to themselves (member-beneficiaries). Furthermore, the deed to be executed by Halik Alon Homeowners Association, Inc. to effect the aforesaid transfer in favor of its individual members is not subject to the documentary stamp tax imposed under 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 P15.00 pursuant to Section 188 of the Tax Code of 1997. Notwithstanding the foregoing, the Bureau of Internal Revenue shall conduct verification and post-audit that the actual occupants of the properties transferred under the CMP are qualified beneficiaries and therefore, the sellers are entitled to exemption from capital gains tax or income tax imposed under the Tax Code of 1997. (BIR Ruling No. 344-11 dated September 13, 2011) Finally, upon issuance of this letter of exemption, and upon registration of the document of sale, a lien on the Certificates of Title of the land to be issued in the name of the beneficiary association of the socialized housing program shall be caused to be annotated by the Register of Deeds having jurisdiction over the properties, to the effect, that the said properties shall be used for socialized housing pursuant to RA No. 7279. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered as null and void. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue ATTACHMENT HALIK ALON HOMEOWNERS ASSOCIATION, INC. Kaingin II-B, Halik Alon, Barangay Sto. Nio, Paraaque City Name of Beneficiary Blk. Lot. Total Area No. No. (sq.m.) Block 1 1 BOCEO, Emerita B. 3A 13 17.71 2 PAGUIO, Virginia Z. 4 14 19.07 3 FUNCION, Rechelle D. 5 14 19.07 4 CABANSAG, Mauricio P. 6 10 13.62 5 TANTIADO, Rea T. 7A 11 14.99 6 TANTIADO, Rolando T. 7B 12 16.35 7 DALISAY, Nenet S. 8A 11 14.99 8 DALISAY, Gil S. Jr. 8B 10 13.62 9 PASION, Francisco I. 9 11 14.99 10 LOLONG, Ma. Teresa E. 11 19 25.88 11 MANALO, Juan Paolo A. 13 24 23.7 12 CORPUZ, Primitivo B. 15A 13 17.71 13 CORPUZ, Flordiles B. 15B 12 16.35 14 ARANETA, Nestor P. 16A 13 17.71 15 IBARLIN, Francisco B. 16B 12 16.35 Block 2 16 ACUA, Virgilio J. 1 33 44.96 17 COLLO, Edgardo O. Sr. 2B 16 21.80 18 COLLO, Rachelle F. 2A 16 21.80 19 CASILAG, Jose D. Jr. 3A 16 21.80 20 AGUILAR, Mary Rose T. 3B 16 21.80 21 JABON, Jimmy E. 4A 16 21.80 22 JABON, Oliver E. 4B 17 23.16 23 MANALO, Eddie Boy B. 5A 17 23.16 24 PACURI, Jimmy B. 6 16 21.80 25 ROMERO, Maricell C. 7 14 19.07 26 EREA, Nelda A. 8 14 19.07 27 BORCE, Salvacion B. 9 16 21.80 28 SAN JUAN, Fe 10A 15 20.43 29 ZOLETA, Joseph E. 10B 14 19.07 30 PARCEDES, Rudy L. 11A 12 16.35 31 MORONIA, Aline 11B 11 14.99 32 BATINGAL, Allan M. 12 23 31.33 33 FABALEA, Leonilo F. 13 20 27.25 34 ORFRECIO, Teresita C. 14A 16 21.80 35 ORFRECIO, Jovy C. 14B 16 21.80 36 AMORES, Juanita B. 15A 17 23.16 37 BARORO, Jucy B. 15B 16 21.80 38 ALBALOS, Loreta C. 16A 17 23.16 39 CABRERA, Eleonor F. 16B 16 21.80 40 TIBIO, Jerry S. 17 18 24.52 41 FABALEA, Regie F. 18 19 25.88 42 BAYLON, Jose M. 19 17 23.16 43 OSORIO, Felecisimo R. 20 17 23.16 44 GALLOS, Exur G. 22A 16 21.80 45 GALLOS, Stephen B. 22B 15 20.43 46 CORONADO, Marcia Nonita P. 23A 12 16.35 47 CORONADO, Michael P. 23B 12 16.35 Block 3 48 PRIETO, Genaro M. 2 15 20.43 49 LIGONES, Mara F. 3 14 19.07 50 BARBARA, Letecia M. 4 15 20.43 51 HOMBRE, Renelyn Pearl B. 5 13 17.71 52 BUENA, Elsa C. 6A 12 16.35 53 JERESANO, Cristy B. 6B 12 16.35 54 DIMSON, Rudy G. 7 29 39.51 55 ZOLETA, Jaylord E. 8A 17 23.16 56 ESPIRITU, Nida M. 8B 17 23.16 57 BUENA, Roman D. Jr. 9A 14 19.07 58 BULANADI, Lenie T. 9B 14 19.07 59 TURLA, Gaudencio P. Jr. 9C 13 17.71 60 DIOLA, Ma. Hera D. 10 13 17.71 61 SEVA, Ramon M. 11 9 12.26 62 LUMBOCAN, Lucy A. 12A 14 19.07 63 JAMILO, Raquel D. 12B 14 19.07 64 ALVAREZ, Lucia A. 13 15 20.43 65 NOBLEZA, Elmer D. 14 14 19.07 66 MORATA, Justiniano A. 16 16 21.80 67 BASILISDES, Joan A. 17A 17 23.16 68 ASEBIAS, Uldarico P. 17B 16 21.80 69 FRANCISCO, Teresita B. 18 31 42.23 70 DEMORIN, Billy H. 19A 17 23.16 71 BARLOSO, Lean Carla F. 19B 16 21.80 72 SAMODIO, Rico Y. 20A 16 21.80 73 ESPANTE, Antonio Y. 20B 16 21.80 74 SAMODIO, Emelda Y. 21A 13 17.71 75 YCOY, Teresita V. 21B 13 17.71 Block 4 76 CHAVEZ, Edna D. 1 26 35.42 77 GREGORIO, Reagan I. 3 15 20.43 78 DELA TORRE, Ricardo 4 15 20.43 79 BALMORES, Eva V. 6 15 20.43 80 VILLANO, Mariano A. Jr. 7 15 20.43 81 RUELO, Edilberta V. 8A 15 20.43 82 VIVAS, Maryjane S. 9A 16 21.8 83 SUANGCO, Jhon Peter M. 10A 13 17.71 84 MARILLA, Edna R. 10B 13 17.71 85 MARILLA, Jennilyn N. 10C 13 17.71 86 CALUSAYAN, Rosalyn P. 11 15 20.43 87 SANCHEZ, Arturo H. 14A 16 21.80 88 SUBSUBAN, Reynaldo T. 15 16 21.80 89 ITULID, Lucresia S. 16 15 20.43 90 GUTANDA, Fernando H. 17 16 21.80 91 SEBASTIAN, Peter I. 18 16 21.8 Block 5 92 ORFRECIO, John Patrick C. 1A 11 14.99 93 NARCISO, Jennylyn E. 1B 11 14.99 94 ORFRECIO, Mark Allan C. 2A 12 16.35 95 QUITORIO, Singlian S. 2B 11 14.99 96 CALIBO, Catherine S. 2 18 24.52 97 YCOY, Armando P. 4 18 24.52 98 GADAYAN, Cerilo M. Jr. 5A 17 23.16 99 RICARDO, Adelina R. 5B 17 23.16 100 CERVANTES, Evelyn O. 10A 13 17.71 101 OBELLO, Efren G. 10B 12 16.35 102 OBELLO, Edilberto G. 10C 12 16.35 103 CORPUZ, Pampela N. 13 10 13.62 104 BABARAN, Leonardo A. 15A 16 21.80 105 BABARAN, Monaliza G. 15B 16 21.80 106 MALAVEGA, Lomeriano M. 16 17 23.16 107 GARABATOR, Ernesto M. Jr. 17 18 24.52 108 PAMAYLAON, Bonifacio L. 18 17 23.16 109 MILLENA, Teresita E. 19 17 23.16 110 CAYOSA, Lourdes M. 20 13 17.71 111 CAYOSA, Gloria S. 21A 13 17.71 112 CAYOSA, Wilma S. 21B 14 19.07 113 APE, Marilyn M. 24 15 20.43