BIR Ruling No. 034-15

February 5, 2015 BIR RULING NO. 034-15 R.A. 7279; BIR Ruling No. 514-2012 Gloria Residents Association, Inc. Gloria Compound Pilar Village Las Pias City Attention: Estrelita T. Villapaa President Gentlemen : This refers to your letter dated November 21, 2013 requesting exemption from capital gains tax (CGT) and other taxes, if any, relative to the transfer of title of land from Gloria Residents Association, Inc. in favor of its qualified members-beneficiaries pursuant to Republic Act 7279 otherwise known as the "Urban Development and Housing Act of 1992". It is represented that Gloria Residents Association, Inc., with Taxpayer's Identification No. 430-758-217-000, is the registered owner of the parcel of land located at Brgy. Almanza, Las Pias City and covered by Transfer Certificate of Title (TCT) No. T-41308 issued by the Registry of Deeds for the City of Las Pias; that it is a non-stock, non-profit organization duly registered with the Housing and Land Use Regulatory Board (HLURB) with Registration No. 04-166; that the aforesaid lot was acquired through a loan under the Community Mortgage Program (CMP) of the Social Housing Finance Corporation (SHFC); that said project was taken-out/paid on November 10, 1994 in the amount of Php7,523,048.80; that the SHFC issued Partial Releases of Real Estate Mortgage constituted over the properties described below: Date of Annotation of Date of Release Real Estate of Real Estate TCT No. Mortgage Mortgage Beneficiaries 005-2012000603 August 23, 1994 October 29, 2013 Kimberly M. Nerbes 005-2012000343 August 23, 1994 July 10, 2013 Nida A. Lorica 005-2012000479 August 23, 1994 - Rosario Maure 005-2012000444 August 23, 1994 July 10, 2013 Rolando T. Lasola 005-2012000433 August 23, 1994 July 10, 2013 Estrelita Villapaa and that the above-named beneficiaries are now in the process of transferring the purchased properties to their respective names. ICESTA In support of your request, the following documents have been submitted: 1) Written Application for Exemption filed with the Law Division; 3) * Certified True Copy of the Transfer Certificate of Title (TCT); 4) Certification from the Social Housing Finance Corporation (SHFC) that the property was acquired through CMP; 5) Certified true copy of the Articles of Incorporation of the community association; 6) Certificates of Payments; 7) Partial Releases of Real Estate Mortgage; 8) BIR Certificate of Registration of the Homeowner Association; and 9) Other pertinent documents. In reply, please be informed that the transfer by Gloria Residents Association, Inc. in favor of the above-named members-beneficiaries who have made full payment of their purchased subdivided lots is not subject to either the CGT imposed under Section 27 (D) (5) of the Tax Code of 1997, as amended, or the creditable withholding tax imposed under Revenue Regulations No. 2-98, as amended, considering that the said transfer of property is made without any consideration and effected only as a formality to finally effect the transfer of the said property to its members-beneficiaries who actually bought the same from the former owner through the Association. In other words, the association is merely transferring the ownership of the property to its members-beneficiaries who actually own the same. DCcHIS Furthermore, the said transfer is not subject to the donor's tax imposed under Section 99 of the Tax Code of 1997, since there is no donative intent on the part of the Association to donate the said property to said members-beneficiaries, considering that it could not donate property the ownership of which already belongs to the members-beneficiaries themselves. (BIR Ruling No. 514-2012 dated August 3, 2012) It is noted that under Section 196 of the Tax Code of 1997, the deeds or documents subject to the documentary stamp tax (DST) imposed therein are those where the realty sold shall be granted, assigned, transferred, or otherwise conveyed to a purchaser or purchasers or to any other person or persons designated by such purchaser or purchasers, thereby excluding from its purview the instant case considering that the supposed purchasers are actually the owners thereof. Besides, no consideration is involved in said transaction upon which the tax imposed could be based. Accordingly, the transfer of title of the subject lots in favor of the above-named beneficiaries is not subject to DST under Section 196 of the Tax Code of 1997. However, the notarial acknowledgment to the deed of conveyance is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the Tax Code of 1997. (BIR Ruling No. 514-2012 dated August 3, 2012) It is, however, understood that the Certificate Authorizing Registration (CAR) shall only be issued after the submission of the requirements provided under RMO 15-2003 and after it is established upon proper verification by the Revenue District Officer (RDO) concerned that, considering the rules on valuation of real property, the actual selling price per sale transaction in this case does not exceed P450,000.00 1 for house and lot and P180,000.00 for lot only for each qualified beneficiaries. (BIR Ruling No. 514-2012 dated August 3, 2012) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue Footnotes 1. HUDCC Resolution No. 1, Series of 2013, promulgated on October 16, 2013, approving the adjustment of price ceiling for horizontal socialized housing from P400,000.00 per house and lot to P450,000.00.