Expropriation of Land

January 15, 1993 BIR RULING NO. 028-93 EXPROPRIATION OF LAND 21 (e) 208-92 028-93 Mr. Robert P. Balao National Housing Authority Quezon Memorial Elliptical Road Diliman, Quezon City This refers to your letter dated September 11, 1992 relative to the requests from private landowners whose properties are under expropriation by the National Housing Authority (NHA) or its socialized housing program and those of the private sector intending to participate in the program, for exemption from the payment of the capital gains tax. cdta In lieu of pursuing the expropriation cases which have been proven to be very tedious and adversarial, the NHA now encourages voluntary settlements and compromises, and one of the incentives which the NHA intends to utilize to encourage such settlements is the exemption from the payment of the said capital gains tax. In reply, please be informed that pursuant to Section 20 of R.A. 7279, pertinent portion of which reads: "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 under privileged 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: xxx xxx xxx the landowners whose properties are under expropriation by the NHA for its socialized housing program and those landowners who intend to participate in the said program shall be exempt from the payment of capital gains tax on the sale of their property in favor of the Republic of the Philippines, provided, however, that the following requirements are complied with. a. Certification from the National Housing Authority (NHA) that the said property shall be used for socialized housing program; b. Recommendation from the Revenue District Officer where the property is located, that the owner of the said property is a bonafide claimant for tax exemption pursuant to the aforequoted provision. However, it is observed that documentary stamp tax is not one of the taxes covered by the tax exemption clause in Sec. 20 of R.A. 7279. Such being the case, the landowners shall be liable to pay the documentary stamp tax on the document conveying the property to the Republic of the Philippines imposed under Sec. 196 of the Tax Code, as amended, based on the actual consideration paid by the government to the landowners. cdtech JOSE U. ONG Commissioner of Internal Revenue