BIR Ruling No. 012-15

January 21, 2015 BIR RULING NO. 012-15 RA 7279; BIR Ruling No. 360-2013; BIR Ruling No. 351-2012 New Bilrey Construction and Development Corporation No. 94-B Aramismis St., Veterans Village Project 7, Quezon City Attention: Annabelle B. Jara Project Coordinator Gentlemen : This refers to your letter dated January 2, 2014 requesting, on behalf of New Bilrey Construction and Development Corporation ("New Bilrey"), tax exemption on the resettlement housing project, VIDA VISTA 3, intended for Typhoon Pablo victims, located at Brgy. New Visayas, Montevista, Compostela Valley, pursuant to Republic Act (RA) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". EcSCAD Documents submitted show that New Bilrey , with Tax Identification Number 008-028-982-000, is a domestic corporation duly registered with the Securities and Exchange Commission (SEC) bearing SEC Registration No. CS201106629 dated April 18, 2011; that it is engaged in general construction and development; that it owns three (3) parcels of land located at New Visayas, Montevista, Compostela Valley, covered by Transfer Certificates of Title (TCT) Nos. 142-2014000327, 142-2014004847 and 142-2014004848, all of the Registry of Deeds for the Province of Davao del Norte, particularly described as follows: TCT NO. 142-2014000327 1 "A PARCEL OF LAND (LOT No. 998-A-2 OF THE SUBDIVISION PLAN, (LRC) psd-185643, BEING A PORTION OF LOT 998-A-2, (LRC) PSD-97829, LRC REC. NO. SALES PAT. NO. 4409), . . . CONTAINING AN AREA OF FORTY THOUSAND (40,000) SQUARE METERS, MORE OR LESS." TCT NO. 142-2014004847 2 "A PARCEL OF LAND (LOT No. 998-A-1-C, PSD-11-051826 AMD.), BEING A PORTION OF LOT 998-A-1 (LRC) PSD-185643, . . . CONTAINING AN AREA OF THIRTY THOUSAND (30,000) SQUARE METERS, MORE OR LESS." TCT NO. 142-2014004848 3 "A PARCEL OF LAND (LOT No. 998-A-1-D, PSD-11-051826 AMD.), BEING A PORTION OF LOT 998-A-1 (LRC) PSD-185643, . . . CONTAINING AN AREA OF THIRTY THOUSAND (30,000) SQUARE METERS, MORE OR LESS." On December 10, 2013, a Contract Agreement was entered into by and between New Bilrey and Montevista Homeowners Association, Inc. , a homeowners organization registered with the Housing and Land Use Regulatory Board (HLURB), whereby New Bilrey has agreed to sell to Montevista Homeowners Association, Inc.'s individual members developed lots, including the completed housing units thereon under the Community Initiative Approach Program (CIAP) of the National Housing Authority (NHA) (TIN 000-916-384-000) for Two Hundred Twenty Thousand Pesos (P220,000) for every developed lot and completed housing unit per family. On December 16, 2013, a Memorandum of Agreement 4 (MOA) was executed by and among New Bilrey , as the landowner/developer/constructor, the members of Montevista Homeowners Association, Inc. , as the beneficiaries, and the NHA, as the sole national government agency engaged in direct housing production mandated to meet the housing needs of the low and marginal income families and to focus its efforts towards the housing needs of the lowest 30% of the urban population. IHcSCA Under the MOA, NHA shall finance the acquisition of 990 developed lots and the construction of completed housing units by the members of the Montevista Homeowners Association, Inc . who are victims of Super Typhoon Pablo, utilizing allocated funds for the Rehabilitation Program sourced from the Task Force Pablo Rehabilitation Plan (PRP) Fund, in the amount of Two Hundred Twenty Thousand Pesos (P220,000) for every house and lot package of 60.00 square meter lot area and a house area of 22.00 square meter Duplex-type model. On December 23, 2013, New Bilrey and the NHA executed a Deed of Absolute Sale whereby the former transferred and conveyed to the latter a portion of the above-described real properties, particularly an area measuring Fifty Nine Thousand Four Hundred (59,400) square meters, more or less, consisting of the Nine Hundred Ninety (990) developed lots for a total consideration of One Hundred Eight Million Nine Hundred Thousand Pesos (P108,900,000.00). 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 is exempt from the payment of the capital gains tax and project-related income taxes. Such being the case, the sale of 990 developed lots on the Fifty Nine Thousand Four Hundred (59,400) , square meters portion of the above-described properties by New Bilrey to NHA is exempt from capital gains tax, project-related income taxes and consequently from withholding tax. ( BIR Ruling No. 360-2013 dated September 30, 2013) Moreover, pertinent portions of Revenue Memorandum Circular (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: (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. AaEcHC xxx xxx xxx It must be noted that the exemption from the documentary stamp tax of NHA, in connection with any of its socialized housing projects, 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 by New Bilrey to NHA of the 990 developed lots on the Fifty Nine Thousand Four Hundred (59,400) square meters portion of the above-described properties, is likewise, exempt from the payment of documentary stamp tax under Section 196 of the Tax Code of 1997, as amended. ( BIR Ruling No. 360-2013 dated September 30, 2013) Upon application for exemption, a lien on the title of the subject parcel of 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 a 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 the transfer of the 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) after the submission of the requirement provided under RMO 15-2003. Moreover, New Bilrey , being the contractor of the socialized housing project, Vida Vista 3 located at Brgy. New Visayas, Montevista, Compostela Valley, is likewise exempt from the payment of VAT on its gross receipts from the said project involving the sale of 990 developed lots on the Fifty Nine Thousand Four Hundred (59,400) square meters portion of TCT Nos. 142-2014000327, 142-2014004847 and 142-2014004848. 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. Moreover, it shall be understood that New Bilrey must issue official receipts clearly indicating therein that the sale of the socialized housing units under the Vida Vista 3 Project is VAT-exempt. ( BIR Ruling No. 351-12 dated May 21, 2012) 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 TCT No. T-50648 registered under the name of Benjamin Maraon. 2. Formerly TCT No. C-11374 registered under the name of Benjamin Maraon. 3. Formerly TCT No. C-11375 registered under the name of Benjamin Maraon. 4. For the development of the Vida Vista 3, Brgy. New Visayas, Montevista, Compostela Valley.