BIR Ruling No. 040-14

February 5, 2014 BIR RULING NO. 040-14 RA No. 7279; BIR Ruling No. 109-13 Consing Village Homeowners Association, Inc. Hda. Luisita, Brgy. Caduha-an Cadiz City, Negros Occidental Attention: Eulogio B. Templa President Gentlemen : This refers to the letter of Ma. Ana R. Oliveros, President of Social Housing Finance Corporation (SHFC) dated November 5, 2013, endorsing the sale transaction between Lope L. Consing and Consing Village Homeowners Association, Inc. for exemption from the payment of Capital Gains Tax and other taxes in accordance with the Republic Act (RA) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". Documents submitted disclose that Lope L. Consing (TIN 126-618-598-000) (hereinafter referred to as Landowner) is the registered owner of a parcel of land, identified as Lot 743-E of the subdivision plan Psd-60877, being a portion of Lot 743 of the Cadastral Survey of Cadiz covered by Transfer Certificate of Title (TCT) No. T-6252 issued by the Registry of Deeds for City of Cadiz. The aforesaid property is situated at Brgy. Caduha-an, Cadiz City with an area of Sixteen Thousand Five Hundred Eighty square meters (16,580 sq.m.),more or less. Consing Village Homeowners Association, Inc. (TIN 412-577-451-000),on the other hand, is a homeowner's organization duly registered with the Housing and Land Use Regulatory Board (HLURB).On August 7, 2013, the parties executed a Deed of Absolute Sale whereby the Landowner transferred and conveyed Ten Thousand Eight Hundred Ninety Seven square meters (10,897 sq.m.) of the subject property to Consing Village Homeowners Association, Inc. at an agreed price of One Million Four Hundred Sixteen Thousand Six Hundred Ten Pesos (P1,416,610.00).Pursuant to the certification issued by SHFC, Ten Thousand Eight Hundred Ninety Seven square meters (10,897 sq.m.) out of Sixteen Thousand Five Hundred Eighty square meters (16,580 sq.m.) covered by TCT No. T-6252 actually comprise a Community Mortgage Program (CMP) Project and shall be proportionately distributed to the association's qualified member-beneficiaries. 1 For this purpose, Consing Village Homeowners Association, Inc. secured a housing loan under the CMP, a financing assistance program of the SHFC a subsidiary of the National Home Mortgage Finance Corporation (NHMFC). DHcTaE In support of its request, Consing Village Homeowners Association, Inc. has completely submitted on November 15, 2013 the following documents: 1) SHFC letter application for tax exemption; 2) Certification of the President of the SHFC that the subject property qualifies and is actually a CMP project; 3) Certified true copy of the Letter-Guaranty; 4) Certified true copy of the Deed of Absolute Sale to the Community Association; 5) Certified true copy of the Articles of incorporation of the Community Association; 6) Certified true copy of the Masterlist of Qualified Beneficiaries duly certified by the SHFC; 7) Certified true copies of the TCT and Latest Tax Declaration of the Property Sold to the Community Association; 8) Certified true copy of the Location Plan of the Lot Sold to the Community Association; 9) TIN ID/BIR Certificate of Registration of the seller and the Homeowner Association; and 10) Other pertinent documents. In reply, please be informed that pursuant to Section 32 of RA No. 7279, pertinent portions of which state that: "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" the landowners who sold their properties for use in a socialized housing project are exempt from the payment of capital gains tax. Such being the case, the sale by the landowners to Consing Village Homeowners Association, Inc. of Ten Thousand Eight Hundred Ninety Seven square meters (10,897 sq.m.) portion of the property covered by TCT No. T-6252 is exempt from the capital gains tax. AIDTSE 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 Homeowners Association shall 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 RA No. 7279. (BIR Ruling No. 109-13 dated March 21, 2013) However, the documentary stamp tax is not one of the taxes covered by the tax exemption clause in Sec. 20 of RA 7279. Accordingly, the landowners are liable to pay the documentary stamp tax on the documents conveying the afore-stated property imposed under Section 196 of the Tax Code of 1997, 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. (BIR Ruling No. 109-13 dated March 21, 2013) It is, however, understood that this ruling is never intended and shall not be construed as giving authority to the concerned Register of Deeds to effect transfer of the land title in the name of the buyer without the necessary certificate of authority to register issued by this Bureau. In this regard, this ruling shall be presented to the Revenue District Office (RDO) concerned in order for the latter to issue the Certificate Authorizing Registration (CAR). The CAR shall only be issued after the submission of the requirements provided under RMO15-2003. (BIR Ruling No. 109-13 dated March 21, 2013) Notwithstanding the foregoing, the Bureau of Internal Revenue shall conduct verification and post-audit that the actual occupants of the property transferred under the CMP are qualified beneficiaries and therefore, the seller is entitled to exemption from capital gains tax or income tax imposed under the Tax Code of 1997. 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 ANNEX Consing Village Homeowners Association, Inc. Hda. Luisita, Brgy. Caduha-an Cadiz City, Negros Occidental Name of Beneficiary Blk. No. Lot Total Area No. 1 TALDE, ROSALIE 1 1 148.00 2 SANTIAGO, MONTEJO R. 1 2 120.00 3 TALDE, MARIO J. 1 3 120.00 4 HAYAWON, JOSE JR. D. 1 4 120.00 5 TAGULABONG JR.,FEDERICO J. 1 5 120.00 6 GONZALES, JOEY T. 1 6 120.00 7 ALIMODIAN, PATRICIO G. 1 7 120.00 8 TALDE, ALFREDO J. 1 8 120.00 9 MERCADER, ROGELIO P. 1 9 120.00 10 JUANICO, SALVADOR V. 1 10 120.00 11 BARREDO, RICARDO M. 1 11 120.00 12 JAYAWON, JOEL D. 1 12 120.00 13 MUEZ, RICHARD D. 1 13 120.00 14 JUANICO, WARLITO V. SR. 1 14 120.00 15 PEDRAJAS, PRESCO O. 1 15 120.00 16 JAYAWON JR.,AURELIO G. 1 16 120.00 17 MERCADER, ARMANDO J. 1 17 120.00 18 RECAIDO, AGUSTIN T. 1 18 120.00 19 CERTIZA, MARITES J. 1 19 120.00 20 GONION, RODERICK T. 1 20 120.00 21 SABANAL, EDWIN R. 1 21 166.00 22 NAVARRO, ROMEO B.,SR. 2 1 169.00 23 NAVARRO, RALPH 2 2 113.00 24 REMIGIO, GILBERT J. 2 3 140.00 25 TAGULABONG, ANALITA J. 2 4 120.00 26 ALAYON, NENITA 2 5 140.00 27 BASA, REY U. 2 6 120.00 28 JAYAWON, ALMA B. 2 7 140.00 29 JUANICO, WILFREDO V. 2 8 120.00 30 ELLARDA, ROMELA PARELLO 2 9 140.00 31 JAYAWON, ARLON G. 2 10 120.00 32 DEITA, JOSE JANNITO J. 2 11 140.00 33 SALVANI, OSCAR L. 2 12 193.00 34 ELLARDA, ROBERTO B. 2 13 164.00 35 TEMPLA, EULOGIO JR. P. 3 1 100.00 36 DAQUIADO, RADEN T. 3 2 99.00 37 MOLIN, ANALINA G. 3 3 202.00 38 TAGULABONG, ARMANDO W. 3 4 206.00 39 RECAIDO, EDGARDO T. 3 5 207.00 40 JAYAWON, GABRIEL D. 3 6 203.00 41 RECAIDO, JERSON 3 7 120.00 42 TALDE JR.,LEOPOLDO J. 3 8 130.00 43 SABANAL, EDMUND R. 5 1 154.00 44 TEMPLA, EULOGIO B. 5 2 154.00 45 RICAFORT, WILLY S. 5 3 120.00 46 NAVARRA, ANGELO B. 5 4 120.00 47 PASTOR, STEPHEN M. 5 5 120.00 48 RICAFORT, WILLIAM S. 5 6 120.00 49 SALVANI, JOSE JERRY L. 5 7 191.00 50 JUNO, SONIA R. 5 8 108.00 51 RICAFORT, RHYN T. 5 9 138.00 52 RIBON, REYNALDO 6 1 154.00 53 JAYAWON, GARY D. 6 2 173.00 54 GENODEALA, JULIUS D. 6 3 120.00 55 BARREDO, RAMON M. 6 4 135.00 56 TEMPLA, PATRICIO 6 5 120.00 57 DUJALE, JASMIN M. 6 6 135.00 58 DELANTAR, ARTEMIO P. 6 7 120.00 59 TALDE, LEODY D. 6 8 135.00 60 PASTOR, LUISA B. 6 9 203.00 61 PEREZ, LORNA M. 6 10 123.00 62 MERCADER, ANGELA J. 6 11 171.00 63 JUTAR, ALFREDO 7 1 155.00 64 GONION, GILBERT A. 7 2 198.00 65 BALANDRA, ROMEO JR. F. 7 3 120.00 66 FRANCISCO, GLORIA 7 4 158.00 67 TAGULABONG, ARTURO W. 7 5 120.00 68 PEREZ, ARNOLD P. 7 6 163.00 69 RICAFORT, ELISEO T. 7 7 120.00 70 SANTAMARIA, JOSE JOERY F. 7 8 168.00 71 SALVADOR, ROBERTO L. 7 9 120.00 72 MATULAC, JESSIE S. 7 10 173.00 73 RIBON, ANITA N. 7 11 120.00 74 NANAT, ANALIZA E. 7 12 178.00 75 ELLARDA, RONILO V. 7 13 120.00 76 ESMEA, ANASOL G. 7 14 183.00 77 ELLARDA, REDGIE 7 15 72.00 78 MUET, ANABELLE A. 7 16 158.00 79 ALAYON, WILSON T. 7 17 77.00 Footnotes 1. See Annex for the masterlist of qualified beneficiaries.