BIR Ruling No. 011-15

January 21, 2015 BIR RULING NO. 011-15 RA7279; BIR Ruling No. 036-2014 Verlin Konstrukt, Inc. 77 Kennedy Drive, Pleasantville Subd. Tandang Sora, Quezon City Attention: Virgilio G. Tape President Gentlemen : This refers to the letter dated January 21, 2014 of Atty. Sinforoso R. Pagunsan, Chief of Staff, Office of the General Manager of the NHA, requesting issuance of Certificate of Tax Exemption for the San Antonio Village located at Brgy. Marapat, Compostela, Compostela Valley Province pursuant to Republic Act (R.A.) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". DCaSHI Documents submitted show that Verlin Konstrukt Inc. (TIN 228-753-802-000), is the registered owner of five (5) parcels of land located at Brgy. Marapat, Compostela, Compostela Valley Province covered by the following Transfer Certificates of Title (TCT), to wit: TCT No. Lot No. Area (sq.m.) 142-2014002371 1 5924 60,038 142-2014002367 2 98,977 142-2014004769 3 5923-C 29,560 142-2014003862 4 5923-B 30,000 142-2014003819 5 5923-A 20,000 total area 238,575 For TCT No. 142-2014002371 and 142-2014002367 On March 10, 2014, a Contract Agreement was executed by and between Verlin Konstrukt Inc. and San Antonio Village Homeowners Association, Inc., a homeowner's organization registered with the Housing and Land Use Regulatory Board (HLURB), whereby former has agreed to sell the abovementioned real property to latter, who offered to buy the same thru the loan financing assistance of the NHA for its qualified individual members under the TS Pablo Rehabilitation Plan (PRP). The developed lots and completed housing units will be covered by the said Title under the Community Initiative Approach Program (CIAP) of the NHA for Two Hundred Twenty Thousand Pesos (P220,000.00) for every developed lot and completed housing unit per family. Moreover, on April 1, 2014, a Memorandum of Agreement (MOA) was executed by and among, Verlin Konstrukt Inc., as the landowner/developer, San Antonio Village Homeowners Association, Inc., as the beneficiaries, and the NHA, as sole national government agency engaged in direct housing production mandated to meet the housing needs of the low and marginal income families. Under the MOA, members 6 of San Antonio Village Homeowners Association, Inc. shall be provided by the NHA with a financial grant under the TSPRP through the CIAP for the acquisition of developed lots with completed housing units in the amount of Two Hundred Twenty Thousand Pesos (P220,000.00) per house and lot package of 60.00 square meter lot area and a house floor area of 22.00 square meter. On April 22, 2014, Verlin Konstrukt Inc. and the NHA executed a Deed of Absolute Sale whereby the former, transferred and conveyed 1,640 developed lots with an aggregate area of One Hundred Fifty Nine Thousand Fifteen square meters (159,015 sq.m.) to NHA at an agreed price of One Hundred Eighty Million Four Hundred Thousand Pesos (P180,400,000.00). For TCT No. 142-2014004769, 142-2014003862 and 142-2014003819 On November 27, 2013, a Contract Agreement was executed by and between Verlin Konstrukt Inc. and San Antonio Village Homeowners Association, Inc., a homeowner's organization registered with the Housing and Land Use Regulatory Board (HLURB), whereby former has agreed to sell the abovementioned real property to latter, who offered to buy the same thru the loan financing assistance of the NHA for its qualified individual members under the TS Pablo Rehabilitation Plan (PRP). The developed lots and completed housing units will be covered by the said Title under the Community Initiative Approach Program (CIAP) of the NHA for Two Hundred Twenty Thousand Pesos (P220,000.00) for every developed lot and completed housing unit per family. IcaHTA Moreover, on April 1, 2014, a Memorandum of Agreement (MOA) was executed by and among, Verlin Konstrukt Inc., as the landowner/developer, San Antonio Village Homeowners Association, Inc., as the beneficiaries, and the NHA, as sole national government agency engaged in direct housing production mandated to meet the housing needs of the low and marginal income families. Under the MOA, members 7 of San Antonio Village Homeowners Association, Inc. shall be provided by the NHA with a financial grant under the TSPRP through the CIAP for the acquisition of developed lots with completed housing units in the amount of Two Hundred Twenty Thousand Pesos (P220,000.00) per house and lot package of 60.00 square meter lot area and a house floor area of 22.00 square meter. On April 22, 2014, Verlin Konstrukt Inc. and the NHA executed a Deed of Absolute Sale whereby the former, transferred and conveyed 860 developed lots with an aggregate area of Seventy Nine Thousand Five Hundred Sixty square meters (79,560 sq.m.) to NHA at an agreed price of Ninety Four Million Six Hundred Thousand Pesos (P94,600,000.00). In reply, please be informed that pursuant to Sections 19 and 20 of Republic Act (RA) No. 7279, pertinent portions of which state that: "Sec. 19. Incentives for the National Housing Authority . The National Housing Authority, being the primary government agency in charge of providing housing for the underprivileged and homeless, shall be exempted from the payment of all fees and charges of any kind, whether local or national, such as income and realty taxes. All documents or contracts executed by and in favor of the National Housing Authority shall also be exempt from the payment of documentary stamp tax and registration fees, including fees required for the issuance of transfer certificates of title. "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: xxx xxx xxx "(d) Exemption from the payment of the following: (1) Project-related income taxes; (2) Capital Gains Tax; (3) Value-added tax for the project contractor concerned;" the landowner/developer of properties who sells its properties for use in a socialized housing project are exempt from the payment of the capital gains tax and project-related income taxes. Such being the case, the sale of 2,500 8 house and lot packages on the Two Hundred Thirty Eight Thousand Five Hundred Seventy Five square meters (238,575 sq.m.) by Verlin Konstrukt Inc. to NHA is exempt from capital gains tax, project-related income taxes and consequently from withholding tax. (BIR Ruling No. 036-2014 dated January 29, 2014) Moreover, pertinent portions of RMC No. 42-01 dated October 5, 2001, provide, viz. : xxx xxx xxx A. National Housing Authority (NHA) The NHA, being the primary government agency in charge of providing housing for the underprivileged and homeless citizens shall be exempted from the payment of the following national internal revenue taxes: EDIHSC (1) . . . (2) Documentary stamp tax on sales transactions executed by and in favor of the NHA in connection with socialized housing projects. Since Section 19 of R.A. 7279 exempts "all documents or contracts executed by and in favor of the NHA," the exemption from documentary stamp tax extends to the other party (either seller or buyer) that is dealing or transacting with the NHA. xxx xxx xxx The exemption from documentary stamp tax of NHA in connection with any of its socialized housing project extends to the other party (either seller or buyer) that deals or transacts with the NHA. Consequently, since NHA is a party to the sale, no documentary stamp tax shall be due on such sale, either on NHA or the party with which NHA is transacting. Accordingly, the transfer of Verlin Konstrukt Inc. to NHA of the 2,500 house and lot packages on the Two Hundred Thirty Eight Thousand Five Hundred Seventy Five square meters (238,575 sq.m.) , are likewise exempt from documentary stamp tax imposed under Section 196 of the Tax Code of 1997, as amended. (BIR Ruling No. 036-2014 dated January 29, 2014) Upon application for exemption, a lien on the title of the land shall be annotated by the Register of Deeds having jurisdiction over the property, to the effect that the same is to be applied or is being applied to socialized housing project pursuant to RA 7279. 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 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) after the submission of the requirements provided under RMO 15-2003. Moreover, Verlin Konstrukt Inc. is likewise exempt from the payment of VAT on its gross receipts from the said project, involving the sale of 2,500 house and lot packages on the Two Hundred Thirty Eight Thousand Five Hundred Seventy Five square meters (238,575 sq.m.) . However, its purchases of goods/articles shall be subject to VAT, even if the said purchases are to be used for the socialized housing project, since VAT is an indirect tax which can be passed on by the seller of the goods/services. It shall be understood that Verlin Konstrukt Inc. must issue non-VAT official receipts on its gross receipts from the said socialized housing project. 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. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue Footnotes 1. Formerly: Original Certificate of Title (OCT) No. P-3316. 2. Formerly: TCT No. T-9743. 3. Formerly: TCT No. C-8088. 4. Formerly: TCT No. C-8087. 5. Formerly: TCT No. C-8086. 6. Composed of members/families of those were left homeless and severely affected by Typhoon Pablo. 7. Composed of members/families of those were left homeless and severely affected by the devastation of Typhoon Pablo. 8. Total units for TCT No. 142-2014002371, 142-2014002367, 142-2014004769, 142-2014003862 and 142-2014003819.