Tax Exemption of the Sale of a Parcel of Land in accordance with the NHA Community Mortgage Program

January 24, 1994 BIR RULING NO. 028-94 21 (e) 414-93 028-94 Intestate Estate of the Late Benita M. Lopez Sheitr-o-gem Building 7th Street cor. National Road Lawaan Village, Balantang, Jaro Iloilo City 5000 Attention: Mr . Florendo M . Besana Gentlemen : This refers to your request for a ruling that the sale of Mr. Oscar Gil Ascalon in his capacity as Judicial Administrator of the Intestate Estate of the Late Benita H. Lopez of a parcel of land located in Brgy. Dalig, Antipolo, Rizal to the Tubigan Neighborhood Association, Inc., a non-stock, non-profit community organization duly registered with the Securities and Exchange Commission (SEC) in accordance with the Community Mortgage Program (CMP) initiated by the National Housing Authority is exempt from capital gains tax pursuant to Section 32(a) and (b) of R.A. 7279 which was approved on March 24, 1992 and published in the March 28, 1992 issue of the Philippine Times Journal and Malaya, newspapers of general circulation. It appears that the Community Mortgage Program (CMP) is a mortgage financing program of the National Home Mortgage Finance Corporation (NHMFC) which assists legally organized associations of underprivileged and homeless citizens to purchase and develop a tract of land under the concept of community ownership; that through a Letter Guaranty by said Government Financing Institution the landowner executes a Deed of Sale to the Association which stands as the borrower and debtor to the extent of the total amount paid by NHMFC to the landowner; that in the instant case, the property being sold to the Tubigan Neighborhood Association, Inc. is covered by Transfer Certificate of Title No. F-60305; that the said transaction was certified by the Urban Poor Affairs Office of Antipolo, Rizal as an approved project under the Community Mortgage Program (CMP) of the government. Field verification conducted in this case disclosed that out of the total area of 23,353 square meters, only 22,429 square meters of the property is under the CMP; that the members of the Tubigan Neighborhood Association, Inc., are duly registered members of the said association; that they are actual occupants of the said land, under privileged and homeless citizens; and, that they are qualified beneficiaries of the socialized housing program of the government as certified to by the Association of Barangay Councils Antipolo, Rizal. In reply, please be informed that pursuant to Section 32 of R.A. No. 7279, pertinent portion of which reads: "Sec. 32. Incentives To encourage its wider implementation, participants in the CMP shall be granted with the following privileges or incentives. xxx xxx xxx (b) Properties sold under the CMP shall be exempted from the capital gains tax; and xxx xxx xxx the landowner who sells her property to the association pursuant to the Community Mortgage Program is exempt from the payment of capital gains tax and from the expanded withholding tax under Revenue Regulations No. 1-90. Such being the case, the sale to the Tubigan Neighborhood Association, Inc. is exempt from the capital gains tax and the expanded withholding tax. Upon issuance of this letter of exemption, and upon registration of the document of sale, a lien on the Certificate of Title of the land to be issued in the name of the Tubigan Neighborhood Association, Inc. shall be caused to be annotated by the Register of Deeds having jurisdiction over the property, to the effect, that the said property shall be used for socialized housing pursuant to R. A. 7279. However, it is observed that documentary stamp tax is not one of the taxes covered by the tax exemption clause under Sections 20 and 32 of R.A. 7279. Such being the case, the landowner through the Judicial Administrator is liable to pay the documentary stamp tax on the document conveying the property to the Association under the CMP as imposed under Sec. 196 of the Tax Code, as amended, based on the actual consideration paid by the association to the said landowner. Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue