BIR Ruling No. 009-15

January 20, 2015 BIR RULING NO. 009-15 RA No. 7279; BIR Ruling No. 109-13; BIR Ruling No. 304-13 Santol Drive Homeowners Association, Inc. Santol St., Golden Acres Subdivision, Las Pias City Attention: Jesus Araneta President Gentlemen : This refers to the letter of Ma. Ana R. Oliveros, President of Social Housing Finance Corporation (SHFC) dated January 2, 2014, endorsing the sale transaction between Omega Twenty XX Incorporated and Santol Drive Homeowners Association Inc. for exemption from the payment of Capital Gains Tax and other taxes in accordance with the Republic Act (RA) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". Documents submitted disclose that Omega Twenty XX Incorporated 1 (TIN 000-187-176-000) (hereinafter referred to as Landowner) is the registered owner of a parcel of land covered by two (2) Transfer Certificates of Title (TCT), to wit: TCT No. Area (sq. m.) Tax Declaration No. 005-2011003567 251 E-017-23000 005-2011003568 250 E-017-23001 501 issued by the Registry of Deeds for Las Pias City. The aforesaid properties are situated at Golden Acres Subdivision, Las Pias City. Santol Drive Homeowners Association Inc. (TIN-420-736-999-000), on the other hand, is a homeowner's organization registered with the Housing and Land Use Regulatory Board (HLURB) under Certificate of Registration No. 19198. On November 7, 2013, the parties executed a Deed of Absolute Sale whereby the owner transferred and conveyed the subject properties to Santol Drive Homeowners Association Inc. at an agreed price of One Million Seven Hundred Sixty Eight Thousand Five Hundred Thirty Pesos (P1,768,530.00). Pursuant to the certification issued by SHFC, the properties covered by TCT No/s. 005-2011003567 (251 sq.m.) and 005-2011003568 (250 sq.m.) are actually a Community Mortgage Program (CMP) Project and shall be proportionately distributed to the association's qualified member-beneficiaries. 2 For this purpose, Santol Drive Homeowners Association Inc. secured a housing loan under the CMP, a financing assistance program of the SHFC, a subsidiary of the National Home Mortgage Finance Corporation (NHMFC). Documentary Stamp Tax (DST) due on the sale has been paid. In support of its request, Santol Drive Homeowners Association Inc. has completely submitted on April 11, 2014 the following documents: 1) SHFC letter application for tax exemption; 2) Certification of the President of the SHFC that the subject properties qualifies and are actually a CMP project; 3) Certified true copy of the Letter-Guaranty; 4) Certified true copy of the Deed of Absolute Sale to the Community Association; 5) Certified true copy of the Articles of incorporation of the Community Association; 6) Certified true copy of the Masterlist of Qualified Beneficiaries duly certified by the SHFC; 7) Certified true copies of the TCT and Latest Tax Declaration of the Property Sold to the Community Association; 8) Certified true copy of the Location Plan of the Lot Sold to the Community Association; 9) TIN ID/BIR Certificate of Registration of the seller and the Homeowner Association; and 10) Other pertinent documents. In reply, please be informed that pursuant to Section 32 of RA No. 7279, pertinent portions of which state that: "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" 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 by the landowner to Santol Drive Homeowners Association Inc. of the properties covered by TCT No/s. 005-2011003567 and 005-2011003568 are exempt from the capital gains tax. 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 Homeowners Association shall 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. (BIR Ruling No. 109-13 dated March 21, 2013) However, the documentary stamp tax is not one of the taxes covered by the tax exemption clause in Sec. 20 of RA 7279. Accordingly, the landowner is liable to pay the documentary stamp tax on the documents conveying the afore-stated properties 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. 109-13 dated March 21, 2013) Moreover, under Section 109 (1) (P) of the Tax Code, as amended by R.A. 9337, the sale of real properties utilized for low-cost and socialized housing as defined by R.A. No. 7279 shall be exempt from VAT, thus, the sale of the aforestated properties by Omega Twenty XX Incorporated to Santol Drive Homeowners Association Inc. are exempt from the imposition of VAT. (BIR Ruling No. 304-2013 dated August 6, 2013) It is, however, understood 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 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. 109-13 dated March 21, 2013) Notwithstanding the foregoing, the Bureau of Internal Revenue shall conduct verification and post-audit that the actual occupants of the property transferred under the CMP are qualified beneficiaries and therefore, the seller is entitled to exemption from capital gains tax or income tax imposed under 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 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 ATTACHMENTS SANTOL DRIVE HOMEOWNERS ASSOCIATION INC. Santol St., Golden Acres Subdivision, Las Pias City Name of Beneficiary Blk. Lot Total Area No. No. (sq.m.) Gultiano, Ariestotle A. 25 10-A 24.03 Gultiano, Ariel A. 25 10-B 24.03 Fadriquela, Sarah Jane F. 25 10-C 24.03 Buenaflor, Kenskie E. 25 10-D 24.03 Benabice, Marissa Y. 25 10-E 30.04 Galvez, Alan R. 25 10-F 28.83 Galvez, Josie Ariel R. 25 10-G 24.03 Bereso, Rolando P. 25 10-H 24.03 Baling, Reymundo C. 25 10-I 24.03 Caberos, Ricardo P. 25 10-J 24.03 Geonanga, Rowena A. 25 12-A 24.03 Baluga, Miguelito G. 25 12-B 24.03 Benabice, Cesar T. 25 12-C 24.03 Araneta, Ramon T. 25 12-D 24.03 Araneta, Jesus T. 25 12-E 28.83 Querubin, Julius V. 25 12-F 28.83 Pamaran, Nelson O. 25 12-G 24.03 Gultiano, Jovelyn M. 25 12-H 24.03 Gultiano, Jovie M. 25 12-I 24.03 Montillano, Crecencio Jr., C. 25 12-J 24.03 Footnotes 1. Formerly: Omega Finance Incorporated. 2. see Annex for the masterlist of qualified beneficiaries.