BIR Ruling No. 035-15

February 5, 2015 BIR RULING NO. 35-15 R.A. 7279; BIR Ruling 514-2012 Anaville Phase 2 Homeowners Association, Inc. Blk. 6, Lot 16 Doa Ana Subdivision Brgy. 175, Camarin, Caloocan City Attention: Milagros M. Bandilla Gentlemen : This refers to your letter dated November 21, 2013 requesting exemption from the payment of capital gains tax ("CGT") and other project-related taxes, relative to the transfer of titles of land from Anaville Homeowners Association, Inc. Phase 2 (the "Association") 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 the Association, 1 with Taxpayer's Identification No. 248-479-516-000, is the registered owner of a parcel of land located at Camarin, Caloocan City, covered by Transfer Certificate of Title (TCT) No. 001-2011000045 2 issued by the Registry of Deeds for Caloocan City; that the Association is a non-stock, non-profit organization duly registered with the Housing and Land Use Regulatory Board (HLURB) per Articles of Incorporation duly certified by the HLURB on November 22, 2013; that the lot covered by TCT No. 001-2011000045 was acquired by the Association through a loan under the Community Mortgage Program (CMP) of the Social Housing Finance Corporation (SHFC) as evidenced by the Certification dated October 20, 2010 issued by Atty. Fermin T. Arzaga, President of the SHFC; and that two (2) of the Association's beneficiaries, namely Jerome Bilon and Jeffrey Clarin, are now in the process of transferring the purchased properties to their respective names after they have fully paid their respective loans as evidenced by Certificates of Payment dated January 15, 2014 and Partial Release of Real Estate Mortgage dated November 7, 2013 issued by the SHFC. DaHISE 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; and 8) BIR Certificate of Registration of the Homeowner Association. In reply, please be informed that the transfer by the Association of the individual titles in favor of Jerome Bilon and Jeffrey Clarin 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. aHTCIc 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 3 for house and lot and P180,000.00 for lot only for each qualified beneficiaries. (BIR Ruling No. 514-2012 dated August 3, 2012) ECDaTI 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 Bureau of Internal Revenue Footnotes 1. TCT No. 001-2011000045 bears the name of the Association as "Annaville Homeowners Association, Inc. Phase 2" instead of "Anaville Homeowners Association, Inc. Phase 2." To clarify the inconsistency, the Officers of the Association submitted a sworn statement stating that the names Annaville Homeowners Association, Inc. Phase 2 and Anaville Homeowners Association, Inc. Phase 2 refer to one and the same entity. 2. Formerly TCT No. 55737. 3. 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.