BIR Ruling No. 030-10

August 18, 2010 BIR RULING NO. 030-10 RA 7279; BIR Ruling No. 501-93; BIR Ruling No. 208-92; BIR Ruling No. S-20-065-2007 Vines Realty Corporation P-4 Bagong Bayan, Jose Panganiban Camarines Norte Attention: Grace M. Urmeneta Local Representative Gentlemen : This refers to your letter dated January 21, 2010 requesting in effect, for a ruling that the sale of a parcel of land by Vines Realty Corporation to Luklukan Norte Homeowners Association, Inc. is exempt from the payment of capital gains tax pursuant to Republic Act (R.A.) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". DTcASE It appears that Vines Realty Corporation is a corporation duly organized and existing under the laws of the Republic of the Philippines with principal office address at No. 77 Timothy Street, Multinational Village, Sucat, Paraaque City with Taxpayer's Identification No. (TIN) 001-291-265-000; that Luklukan Norte Homeowners Association, Inc. is a non-stock, non-profit organization duly registered with the Housing and Land Use Regulatory Board (HLURB) with postal address at Brgy. Luklukan Norte, Jose Panganiban, Camarines Norte with TIN 005-420-152-000; that Vines Realty Corporation is the absolute registered owner of a parcel of land covered by Transfer Certificate of Title No. T-68764 issued by the Registry of Deeds for Camarines Norte containing an area of 17,600 sq.m.; that it agreed to sell to Luklukan Norte Homeowners Association, Inc. the said parcel of land and the latter agreed to buy from the former a portion of the said parcel of land with an area of 11,194 sq.m. under the existing Community Mortgage Program (CMP) of the Social Housing Finance Corporation (SHFC) at an agreed price of Php4,645,510.00. In reply, please be informed that pursuant to Sections 20 & 32 of R.A. 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; xxx xxx xxx. Sec. 32. Incentives. To encourage its wider implementation, participants in the CMP shall be granted with the following privileges or incentives: ScCDET 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 Vines Realty Corporation to Luklukan Norte Homeowners Association, Inc. 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, Vines Realty Corporation is liable to pay the documentary stamp tax on the documents conveying the aforestated 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. Upon issuance of this letter of exemption, and upon registration of the documents of sale, a lien on the Certificate of Title of the land to be issued in the name of the Homeowners Association shall be caused to be annotated by the Register of Deeds having jurisdiction over the properties, to the effect that the said property shall be used for socialized housing pursuant R.A. 7279. (BIR Ruling No. 501-93 dated December 22, 1993) The 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 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 shall conduct verification and post-audit that the actual occupants of the properties transferred under the CMP are qualified beneficiaries and therefore, the seller is entitled to exemption from the capital gains tax or income tax imposed under the Tax Code of 1997, as amended. (BIR Ruling No. S-20-065-2007 dated October 15, 2007; BIR Ruling No. 501-93 dated December 22, 1993; BIR Ruling No. 208-92 dated July 17, 1992) IEHTaA 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