BIR Ruling No. 023-15

February 3, 2015 BIR RULING NO. 023-15 RA 7279; BIR Ruling No. 473-2014 C.S. Garcia Construction 23 Pelayo St., BF Homes, Quezon City Attention: Engr. Crisanto S. Garcia President Gentlemen : This refers to the letter of Felicisimo F. Lazarte, Jr., Group Manager of Northern and Central Luzon Management Office, National Housing Authority (NHA) dated May 14, 2013, requesting tax exemption on the low cost housing project Bulacan Resettlement Project located in Brgy. Santol, Balagtas, Bulacan pursuant to Republic Act (R.A.) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". Documents submitted show that Flordeliza Atienza, Mario S. Bagay, Demetria T. Bagay, Felipe B. Constantino, Julia B. Constantino, Ericson T. Bagay, and Erwin Santiago T. Bagay (hereinafter referred to as Landowners) are the registered owners of parcels of land covered by eight (8) Original/Transfer Certificates of Title (OCT) (TCT) located at Brgy. Santol, Balagtas, Bulacan to wit: Landowners OCT/TCT Area (sq. m.) Flordeliza Atienza RT-48237 (T-72099) 45,437 Sps. Mario S. Bagay & Demetria T. Bagay T-260252 5,950 Mario S. Bagay 040-RT-2013007423 (T-266537) 3,621 Felipe B. Constantino and Julia B. Constantino RO-1085 (0-1549) 5,011 Ericson T. Bagay P-8200 (M) 1,152 Ericson T. Bagay P-9379 (M) 113 Ericson T. Bagay & Erwin Santiago T. Bagay 040-2010001662 196 Ericson T. Bagay & Erwin Santiago T. Bagay 040-2010001663 6,854 Total Area 68,334 Deeds of Absolute of Sale were executed by and between the landowners and the NHA, whereby the landowners transferred and conveyed the above mentioned properties, to wit: Date of Deed of Consideration Landowners Absolute Sale OCT/TCT (PhP) Flordeliza Atienza September 17, 2012 RT-48237 (T-72099) 9,087,400.00 Sps. Mario S. Bagay & Demetria T. Bagay September 17, 2012 T-260252 1,487,500.00 040-RT-2013007433 Mario S. Bagay September 17, 2012 (T-266537) 1,086,300.00 Felipe B. Constantino and Julia B. Constantino August 1, 2013 RO-1085 (0-1549) 1,252,750.00 Ericson T. Bagay September 17, 2012 P-8200 (M) 288,000.00 Ericson T. Bagay September 17, 2012 P-9379 (M) 28,250.00 Ericson T. Bagay & Erwin Santiago T. Bagay January 7, 2013 040-2010001662 49,000.00 Ericson T. Bagay & Erwin Santiago T. Bagay January 7, 2013 040-2010001663 1,370,800.00 On March 27, 2013, a Contract Agreement was executed by and between C.S. GARCIA CONSTRUCTION (TIN: 102-241-655-000) and Balagtas Heights Homeowner's Association Incorporated, (BHHOAI), a homeowner's organization registered with the Housing and Land Use Regulatory Board (HLURB) with Certificate of Registration No. 20055, whereby the former offers its services to the latter to undertake the construction of 1,000 housing units in Balagtas Heights Resettlement Project for Two Hundred Forty Thousand Pesos (P240,000.00) for every developed lot and completed housing unit per family, which shall be financed by the NHA through Community Initiative Approach Program (CIAP). AcICHD Moreover, on April 22, 2013, a Memorandum of Agreement 1 (MOA) was executed by and among C.S. GARCIA CONSTRUCTION, as the landowner/developer/constructor, BHHOAI, as the beneficiaries, and the NHA, as the lead agency in the implementation of the National Resettlement Programs of the government for FY 2013 and to ensure the timely, peaceful and orderly relocation and resettlement of the informal settler families along danger areas affected by the clearing of waterways and esteros in Metro Manila. Under the MOA, members 2 of the BHHOAI shall be provided by the NHA with a financial grant for the acquisition of additional 1,000 developed lots and financing of the acquisition of completed 1,000 loftable row-house units under Batch 1 through the CIAP in the amount not to exceed One Hundred Fifteen Thousand Pesos (P115,000.00) per lot and One Hundred Twenty Five Thousand Pesos (P125,000.00) per loftable housing unit. To give effect to the Contract Agreement and MOA, on July 5, 2013 and October 24, 2014, Deeds of Absolute Sale were executed by and between C.S. GARCIA CONSTRUCTION and NHA, whereby the former agreed to sell to the latter, 1,000 3 develop lots or parcels of lands on the Forty One Thousand Seven Hundred Thirty square meters (41,730 sq. m.) 4 covered by OCT/TCT Nos. RT-48237 (T-72099), T-260252, 040-RT-2013007423 (T-266537), RO-1085 (0-1549), P-8200 (M), P-9379 (M), 040-2010001662 and 040-2010001663 for One Hundred Fifteen Million Pesos (P115,000,000.00). 5 In reply, please be informed that pursuant to Sections 19 and 20 RA No. 7279, pertinent portions of which state that: "Sec. 19. Incentives for the National Housing Authority. The Notional 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 on raw lands used for the project; (3) Value-added tax for the project contractor concerned;" xxx xxx xxx" Moreover, pertinent portions of RMC No. 42-01 dated October 5, 2001, provide, viz. : SDATEc 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 Sale by the Landowners to NHA The owner of the raw land is exempt from the payment of capital gains tax or the withholding tax under Revenue Regulations No. 2-98, as amended, on the conveyance of the parcel of land for use in the aforesaid socialized housing project. (BIR Ruling No. 473-2014 dated November 24, 2014) Accordingly, the sale by the landowners to NHA of the subject properties covered OCT/TCT Nos. RT-48237 (T-72099), T-260252, 040-RT-2013007423 (T-266537), RO-1085 (0-1549), P-8200 (M), P-9379 (M), 040-2010001662 and 040-2010001663 is exempt from the payment of capital gains tax imposed under Sec. 24 (D) of the Tax Code of 1997, as amended or creditable withholding tax under Revenue Regulations No. 2-98, as amended. 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 by the landowners to NHA of the subject property, is, likewise, exempt from the payment of documentary stamp tax under Section 196 of the Tax Code of 1997, as amended. (BIR Ruling No. 473-2014 dated November 24, 2014) Upon application for exemption, a lien on the titles of the land shall be annotated by the Register of Deeds having jurisdiction over the properties, 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 requirement provided under RMO 15-2003. Transaction between C.S. GARCIA CONSTRUCTION and NHA The developer of properties who sells its properties for use in a socialized housing project are exempt from the payment of project-related income taxes. TAECaD Such being the case, the sale of C.S. GARCIA CONSTRUCTION to NHA of the 1,000 developed lots under Batch 01-2013 and 2-2014, in so far as the aggregate area of Forty One Thousand Seven Hundred Thirty square meters (41,730 sq. m.) portion of the subject properties is concerned, is exempt from the capital gains tax, project-related income taxes and consequently from withholding tax. (BIR Ruling No. 473-2014 dated November 24, 2014) 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 by C.S. GARCIA CONSTRUCTION to NHA of the 1,000 developed lots under Batch 01-2013 and 2-2014 on the Forty One Thousand Seven Hundred Thirty square meters (41,730 sq.m.) portion of the subject properties is concerned, is, likewise, exempt from the payment of documentary stamp tax under Section 196 of the Tax Code of 1997, as amended. (BIR Ruling No. 473-2014 dated November 24, 2014) Pursuant to Section 20 of RA 7279, a project contractor of a socialized housing project shall also be exempt from the payment of value-added tax (VAT) on the project concerned, involving 1,000 developed lots under Batch 01-2013 and 2-2014 on the Forty One Thousand Seven Hundred Thirty square meters (41,730 sq.m.) portion of the subject property. 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 C.S. GARCIA CONSTRUCTION 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 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 Bureau of Internal Revenue Footnotes 1. (For Financing the Acquisition of Developed Lots and Financing the Acquisition of Completed Housing Units) Balagtas Heights Resettlement Site, Balagtas, Bulacan. 2. Composed of members/families living in danger areas affected by waterways and esteros in Metro Manila. 3. 728 under Batch 1-2013 and 272 under Batch 2-2014. 4. 30,538 sq. m. for Batch 1-2013 and 11,192 sq. m. for Batch 2-2014. 5. P83,720,000.00 for Batch 1-2013 and P31,280,000.00 under Batch 2-2014.