BIR Ruling No. 045-11

February 16, 2011 BIR RULING NO. 045-11 RA 7279; BIR Ruling SH(050)368-2009 Hon. Enrico R. Echiverri City Mayor Caloocan City Sir : This refers to your letter dated December 16, 2010, requesting for capital gains tax exemption under Republic Act (R.A.) No. 7279, also known as the Urban Development Housing Act of 1992, in connection with the expropriation by the City Government of Caloocan of several properties located at the Sampalukan area of Caloocan City. Based on documents submitted, it appears that the City Government of Caloocan (hereinafter referred to as "Caloocan") filed a Complaint for Expropriation dated February 24, 1999 before the Regional Trial Court of Caloocan City. Finding the Complaint sufficient in form and substance, the court issued an Order authorizing Caloocan to enter and take immediate possession of the properties sought to be expropriated. In a Decision dated May 3, 2001, the court upheld the power of Caloocan to expropriate the properties for low cost housing and fixed the just compensation to be paid by Caloocan for each of the properties. The said decision was appealed to the Court of Appeals, which affirmed the validity of the expropriation of the properties in furtherance of Caloocan's duty to provide low-cost land and housing for its homeless and underprivileged citizens under R.A. No. 7279. However, the Court of Appeals increased the amount of just compensation to be paid by Caloocan to the property-owners to an aggregate sum of P113,679,506.00. The said Decision listed the following properties as having been legally expropriated by Caloocan TCT No. T-200680, TCT No. T-200689, TCT No. 177164, TCT No. 142683, TCT No. T-200688, TCT No. T-200687, TCT No. 48748, TCT No. T-116537, TCT No. 104483, TCT No. 142685, TCT No. 142687, TCT No. 48751, TCT No. 280312, and TCT No. 200686. In reply, please be informed that Section 20 of Republic Act No. 7279 reads: EcATDH "Sec. 20. Incentives for Private Sector Participating in Socialized Housing. To encourage greater participation in socialized housing, and further reduced 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: "(1) . . . "(2) Capital gains tax on raw lands used for the project; " Based on the foregoing provisions, the landowners of the real properties used in the socialized housing project of the City of Caloocan, are exempt from the payment of capital gains tax on the conveyance, although involuntarily, of the above-described property. Upon application for exemption, a lien on the title to the land shall be annotated by the Register of Deeds having jurisdiction over the property, to the effect that the same is to be applied or is being applied to a socialized housing project pursuant to R.A. No. 7279. (BIR Ruling SH(050)368-2009) However, please take note 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 titles in the name of the City of Caloocan 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) without the payment of the capital gains tax on the transfer of the subject realty to the City of Caloocan. The CAR shall only be issued after the submission of the requirements provided under RMO 15-2003. 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. cAHDES Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue