BIR Ruling No. 025-10

August 4, 2010 BIR RULING NO. 025-10 RA 7279; BIR Ruling No. S-20-077-2000; BIR Ruling No. S-20-063-2007; BIR Ruling No. S-20-064-2007; BIR Ruling No. S-20-024-2008; BIR Ruling No. 316-92 Jamaica Realty and Marketing Corporation 2nd Floor Phoenician Building, Panganiban Drive Naga City Attention: Salvador C. Camposano AVP for Bicol Operations Gentlemen : This refers to your letter dated September 09, 2009 requesting in effect, for a ruling that the sale of parcels of land by Jamaica Realty and Marketing Corporation to the Calasgasan Urban Poor Homeowners' Association, Inc. Cluster II is exempt from the payment of capital gains tax pursuant to Republic Act (RA) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". STcaDI It appears that Jamaica Realty and Marketing Corporation is a domestic corporation organized and duly registered under and by virtue of the laws of the Philippines with Taxpayer Identification Number (TIN) 000-933-917-002; that it is the registered and absolute owner of parcels of land situated at Barangay Calasgasan, Daet, Camarines Norte covered by Transfer Certificate of Title Nos. T-61027, T-61103, T-61063, T-61104, T-61028, T-61092, T-61093, T-61094, T-61095, T-61096, T-61084, T-61085, T-61086, T-61087, T-61089, T-61082, T-61081, T-61080, T-61079, T-61078, T-61077, T-61090, T-61029, T-61065, T-61066, T-61067, T-61068, T-61069, T-61056, T-61057, T-61058, T-61059, T-61060, T-61083, T-61070, T-61174, T-61175, T-61176, T-61177, T-61179, T-61116 issued by the Register of Deeds for the Province of Camarines Norte with a total area of 34,610 sq.m.; that on the other hand, Calasgasan Urban Poor Homeowner's Association, Inc. Cluster II is a community association organized and existing under and by virtue of the laws of the Philippines with office address at Purok 1, Barangay Calasgasan, Daet, Camarines Norte; that it is registered with the Housing and Land Use Regulatory Board (HLURB), Region V, Legazpi City with Taxpayer Identification Number (TIN) 005-421-628; that on November 26, 2009, the parties executed a Deed of Sale whereby Jamaica Realty and Marketing Corporation transfer and convey the Subject Property to Calasgasan Urban Poor Homeowner's Association, Inc. Cluster II at an agreed price of Eight Million Six Hundred Fifty Two Thousand Five Hundred Pesos (P8,652,500.00); and that Calasgasan Urban Poor Homeowner's Association, Inc. Cluster II will be securing a housing loan under the Community Mortgage Program (CMP), a financing assistance program of the Social Housing Finance Corporation (SHFC) a subsidiary of the National Home Mortgage Finance Corporation (NHMFC). In reply, please be informed that pursuant to Sections 20 and 32 of RA No. 7279, pertinent portions of which state that: "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: xxx xxx xxx (2) Capital gains tax on raw lands used for the project; (3) Value-added tax for the project contractor concerned; Sec. 32. Incentives. To encourage its wider implementation, participants in the CMP shall be granted with the following privileges or incentives: TSAHIa xxx xxx xxx (b) Properties sold under the CMP shall be exempted from the capital gains tax; and" the landowner who sold his property for use in a socialized housing project is exempt from the payment of capital gains tax and value-added tax for the project contractor concerned. Such being the case, the sale of the aforestated property by Jamaica Realty and Marketing Corporation to Calasgasan Urban Poor Homeowner's Association, Inc. Cluster II is exempt from the capital gains tax. However, the documentary stamp tax is not one of the taxes covered by the tax exemption clause in Sec. 20 of RA 7279. Accordingly, Jamaica Realty and Marketing Corporation is liable to pay the documentary stamp tax on the documents conveying the afore-stated property imposed under Section 196 of the Tax Code of 1997, as amended, 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. 316-92 dated October 28, 1992) The Revenue District Office (RDO) shall issue the corresponding Certificate Authorizing Registration and/or Tax Clearance (CAR/TCL) only after the submission of the necessary and requisite documents stated in Section 5 of Revenue Regulations No. (RR) 17-2001, including proof of payment of the corresponding documentary stamp tax imposed under Section 196 of the Tax Code of 1997, as amended. Notwithstanding the foregoing, the Bureau of Internal Revenue (BIR) shall conduct verification and post-audit that the actual occupants of the properties transferred under the CMP are qualified beneficiaries and therefore, the sellers are entitled to exemption from the capital gains tax or income tax imposed under the Tax Code of 1997, as amended. Finally, upon application for exemption, a lien on the titles of the lands shall be annotated by the Registry of Deeds having jurisdiction over the properties, to the effect that the same are being applied for socialized housing project pursuant to RA No. 7279. (BIR Ruling Nos. S-20-077-2000 dated August 14, 2000, S-20-063-2007 dated October 03, 2007, 064-2007 dated October 30, 2007, 024-2008 dated May 14, 2008) HDAaIc 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