BIR Ruling No. 006-06

June 19, 2006 BIR RULING NO. 006-06 Super Island 2000 Homeowners Ass., Inc . Sitio Aguila, Brgy. Pichon (Miranda) Babak District, Island Garden City of Samal Davao del Norte Attention: Mr. Leopoldo M. Devero, Sr. President Gentlemen : This refers to your letter dated February 14, 2005 indorsed to this Office by Director Jonas B. Lindo of the Presidential Action Center requesting for a ruling exempting Super Island 2000 Homeowners Association, Inc. (the "Association") from the payment of documentary stamp tax (DST) on the loan agreement executed by the Association and the National Home Mortgage Finance Corporation (NHMFC). As represented, the Association is a legal association of underprivileged and homeless citizens organized on December 11, 2001. Pursuant to Section 36 of Republic Act (R.A.) No. 7279, otherwise known as the "Urban and Development Housing Act of 1992," the Association is securing a housing loan under the Community Mortgage program (CMP), a financing assistance program of the NHMFC for the acquisition of the lots that its qualified member-beneficiaries occupy. Subject property is covered by Transfer Certificate of Title No. T-57650 with an area of 30,000 sq. m., more or less. In reply, please be informed that Section 199 (d) of the Tax Code of 1997 as amended by R.A. No. 9243 provided, 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: (a) . . . (b) . . . (c) . . . (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." In view of the foregoing, only loan agreements executed by individual borrowers-buyers, where the aggregate amount of loan does not exceed Two hundred fifty thousand pesos (P250,000.00) per loan agreement, are exempt from documentary stamp tax. In other words, where the amount of loan exceeds Two hundred fifty thousand pesos (P250,000.00) per loan agreement, the document is subject to documentary stamp tax. 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. AcSIDE Very truly yours, (SGD.) JOSE MARIO C. BUAG Commissioner of Internal Revenue