BIR Ruling No. 015-15

January 21, 2015 BIR RULING NO. 015-15 RA 7279; BIR Ruling No. 036-2014 HG-III Construction and Development Corporation 3368 Harvard Street, Pinagkaisahan Makati City Attention: Aguinaldo S. Guintu Chairman Gentlemen : This refers to your letter dated July 2, 2013, requesting for the issuance of Certificate of Tax Exemption for the AFP-PNP Housing Program in Brgy. Cruz, Barotac Nuevo, Iloilo known as Lindz Ville Subdivision pursuant to Republic Act (R.A.) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". Documents submitted show that that HG-III Construction and Development Corporation (TIN 227-349-940-000), is the absolute and registered owner of parcels of land located at Brgy. Cruz, Barotac Nuevo, Iloilo, covered by Transfer Certificates of Title (TCT), to wit; TCT No. Area (sq. m.) 1 090-2013006217 140 2 090-2013006218 116 3 090-2013006219 75 4 090-2013006220 72 5 090-2013006221 72 6 090-2013006222 72 7 090-2013006223 72 8 090-2013006224 72 9 090-2013006225 79 10 090-2013006226 72 11 090-2013006227 72 12 090-2013006228 72 13 090-2013006229 72 14 090-2013006230 72 15 090-2013006231 72 16 090-2013006232 72 17 090-2013006233 72 18 090-2013006234 78 19 090-2013006235 75 20 090-2013006236 73 21 090-2013006237 73 22 090-2013006238 72 23 090-2013006239 72 24 090-2013006240 72 25 090-2013006241 72 26 090-2013006242 72 27 090-2013006243 72 28 090-2013006244 72 29 090-2013006245 72 30 090-2013006246 72 31 090-2013006247 72 32 090-2013006248 74 33 090-2013006249 72 34 090-2013006250 90 35 090-2013006251 72 36 090-2013006252 72 37 090-2013006166 120 38 090-2013006167 120 39 090-2013006168 120 40 090-2013006169 120 41 090-2013006170 120 42 090-2013006171 120 43 090-2013006172 120 44 090-2013006173 130 45 090-2013006174 127 46 090-2013006175 120 47 090-2013006175 120 48 090-2013006177 120 49 090-2013006178 120 50 090-2013006140 72 51 090-2013006257 98 52 090-2013006258 89 53 090-2013006259 72 54 090-2013006260 72 55 090-2013006261 72 56 090-2013006262 72 57 090-2013006263 72 58 090-2013006264 72 59 090-2013006265 158 60 090-2013006266 158 61 090-2013006267 155 62 090-2013006268 151 63 090-2013006269 19,489 64 090-2013006270 9,429 65 090-2013006271 11,135 66 090-2013006179 150 67 090-2013006180 150 68 090-2013006181 131 69 090-2013006182 118 70 090-2013006183 120 71 090-2013006184 120 72 090-2013006185 120 73 090-2013006186 120 74 090-2013006187 120 75 090-2013006188 120 76 090-2013006141 96 77 090-2013006142 81 78 090-2013006143 81 79 090-2013006144 186 80 090-2013006145 176 81 090-2013006146 175 82 090-2013006147 173 83 090-2013006148 144 84 090-2013006149 109 85 090-2013006150 106 86 090-2013006151 104 87 090-2013006152 101 88 090-2013006153 100 89 090-2013006154 100 90 090-2013006155 100 91 090-2013006156 100 92 090-2013006157 146 93 090-2013006158 130 94 090-2013006159 120 95 090-2013006160 120 96 090-2013006161 120 97 090-2013006134 115 98 090-2013006135 121 99 090-2013006136 72 100 090-2013006137 72 101 090-2013006138 72 102 090-2013006139 72 103 090-2013006253 72 104 090-2013006254 72 105 090-2013006255 72 106 090-2013006256 95 107 090-2013006199 136 108 090-2013006200 147 109 090-2013006202 108 110 090-2013006203 137 111 090-2013006205 74 112 090-2013006206 74 113 090-2013006204 132 114 090-2013006207 74 115 090-2013006208 74 116 090-2013006209 74 117 090-2013006210 74 118 090-2013006211 86 119 090-2013006201 117 120 090-2013006212 86 121 090-2013006213 138 122 090-2013006214 140 123 090-2013006215 140 124 090-2013006216 140 125 090-2013006162 120 126 090-2013006163 120 127 090-2013006164 120 128 090-2013006165 120 129 090-2013006123 600 130 090-2013006124 500 131 090-2013006125 500 132 090-2013006126 500 133 090-2013006127 500 134 090-2013006128 400 135 090-2013006129 346 136 090-2013006130 100 137 090-2013006131 100 138 090-2013006132 120 139 090-2013006133 110 140 090-2013006189 120 141 090-2013006190 120 142 090-2013006191 420 143 090-2013006192 120 144 090-2013006193 132 145 090-2013006194 161 146 090-2013006195 137 147 090-2013006196 153 148 090-2013006197 148 149 090-2013006198 144 58,222 Phase I On August 9, 2012, a Contract Agreement was executed by and between HG-III Construction and Development Corporation and AFP Housing Homeowners Association, Inc. and PNP Housing Homeowners Association, Inc., a homeowner's organization registered with the Housing and Land Use Regulatory Board (HLURB), whereby HG-III Construction and Development Corporation has agreed to sell to AFP Housing Homeowners Association, Inc. and PNP Housing Homeowners Association, Inc.'s individual members the developed lots and completed housing units covered by the said Titles under the Community Initiative Approach Program (CIAP) of the National Housing Authority (NHA) for Two Hundred Forty Thousand Pesos (P240,000.00) for every developed lot and completed housing unit per family. CIAHDT Moreover, on August 16, 2012, a Memorandum of Agreement (MOA) for developed lots and completed housing units, was executed by and among HG-III Construction and Development Corporation as the landowner/developer, AFP Housing Homeowners Association, Inc. and PNP Housing Homeowners Association, Inc., as the beneficiaries, and the NHA, as the implementing government agency for the AFP/PNP Housing Program as cited under Administrative Order No. 9 dated April 11, 2011. Under the MOA, members of the AFP Housing Homeowners Association, Inc. and PNP Housing Homeowners Association, Inc., shall be provided by the NHA with a financial grant for the acquisition house and lot packages in the AFP/PNP Housing Project through the CIAP in the amount of Php240,000.00 for a House and Lot Package of Forty square meters (40.00 sq.m.) lot and Twenty Two square meters (22.00 sq.m.) floor area. On December 11, 2012, HG-III Construction and Development Corporation and the NHA executed a Deed of Conveyance whereby the owner, transferred and conveyed, 500 house and lot packages with an aggregate area of Twenty One Thousand Eight Hundred Eighty Five square meters (21,885 sq.m.) portion of the subject properties to NHA at an agreed price of Fifty Seven Million Five Hundred Thousand Pesos (P57,500,000.00). Phase II On February 7, 2013, a Contract Agreement was executed by and between HG-III Construction and Development Corporation and AFP Housing Homeowners Association, Inc. and PNP Housing Homeowners Association, Inc., whereby HG-III Construction and Development Corporation has agreed to sell to AFP Housing Homeowners Association, Inc. and PNP Housing Homeowners Association, Inc.'s individual members the developed lots and completed housing units covered by the said Titles under the CIAP of the NHA for Two Hundred Forty Thousand Pesos (P240,000.00) for every developed lot and completed housing unit per family. Moreover, on May 7, 2013, a MOA for developed lots and completed housing units, was executed by and among HG-III Construction and Development Corporation as the landowner/developer, AFP Housing Homeowners Association, Inc. and PNP Housing Homeowners Association, Inc., as the beneficiaries, and the NHA, as the implementing government agency for the AFP/PNP Housing Program as cited under Administrative Order No. 9 dated April 11, 2011. Under the MOA, members of the AFP Housing Homeowners Association, Inc. and PNP Housing Homeowners Association, Inc., shall be provided by the NHA with a financial grant for the acquisition house and lot packages in the AFP/PNP Housing Project through the CIAP in the amount of Php240,000.00 for a House and Lot Package of Forty square meters (40.00 sq.m.) lot and Twenty Two square meters (22.00 sq.m.) floor area. On June 18, 2013, HG-III Construction and Development Corporation and the NHA executed a Deeds of Conveyance whereby the owner, transferred and conveyed, 500 house and lot packages with an aggregate area of Twenty Thousand Nine Hundred Seven square meters (20,907 sq.m.) portion of the subject properties to NHA at an agreed price of Fifty Seven Million Five Hundred Thousand Pesos (P57,500,000.00). 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. AIECSD "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 sell 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 1,000 house and lot packages on the Forty Two Thousand Seven Hundred Ninety Two square meters (42,792 sq.m.) 1 portion of the subject properties by HG-III Construction and Development Corporation 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: (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 HG-III Construction and Development Corporation to NHA of the sale of 1,000 house and lot packages on the Forty Two Thousand Seven Hundred Ninety Two square meters (42,792 sq.m.) 2 portion of the subject properties are concerned, 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. EcTCAD 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 requirement provided under RMO 15-2003. Moreover, HG-III Construction and Development Corporation is likewise exempt from the payment of VAT on its gross receipts from the said project, involving the sale of the sale of 1,000 house and lot packages on the Forty Two Thousand Seven Hundred Ninety Two square meters (42,792 sq.m.) 3 portion of the subject properties. 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 HG-III Construction and Development Corporation 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. For Phase I and Phase II. 2. Id. 3. Id.