Sale of Land to NHA under CMP - Exempt from Capital Gains Tax

January 21, 1993 BIR RULING NO. 045-93 SALE OF LAND TO NHA UNDER CMP EXEMPT FROM CAPITAL GAINS TAX 21 (e), 24 332-92 045-93 Mr. Felix J. Domingo Felbelt's Building Km. 7, Lanang, Davao City This refers to your letter dated December 14, 1992 requesting confirmation of your opinion that the sale of your real properties located at Matina Aplaya, Purok 6, Davao City to Matina Aplaya Shanghai Village Homeowners Association, Inc., a non-stock, non-profit community organization duly registered with Home Insurance and Guaranty Corporation, in accordance with the Community Mortgage Program (CMP) initiated by the National Housing Authority is exempt from capital gains tax pursuant to Section 32(b) of R.A. 7279, otherwise known as the Urban Development and Housing Act of 1992. cdt It appears that the Community Mortgage Program (CMP) is a mortgage financing program of the National Home Mortgage Finance Corporation (NHMFC) which assists locally organized associations of underprivileged and homeless citizens to purchase and develop a tract of land under the concept of community ownership; that a Letter of Guaranty was issued by NHMFC in your favor, for and in consideration of your willingness to sell in favor of the Matina Aplaya Shanghai Village Homeowners Association, Inc., parcels of land covered by TCT Nos. 161166 and 161157 consisting of 26,908 square meters located at Matina Aplaya, Purok 6, Davao City, undertaking to pay the amount of P5,220,790.35 representing the proceeds of the loan of the Community Association as borrower-buyer; that you executed a Deed of Absolute Sale of the said property in favor of the Association for a consideration of P5,236,960.00; that the said transaction was certified by the National Housing Authority, the originator, as an approved project under the Community Mortgage Program (CMP) of the government. In reply, please be informed that pursuant to Section 32(b) of R.A. No. 7279, pertinent portion of which reads: "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 CMP shall be exempted from the capital gains tax. xxx xxx xxx the landowners who sell their property to the tenant's association pursuant to the Community Mortgage Program are exempt from the payment of capital gains tax and from the expanded withholding tax under Revenue Regulations No. 1-90. Upon the sale thereof, the capital gains realized by the owners shall be exempt from capital gains tax pursuant to the aforequoted provisions of R.A. 7279. Such being the case, the sale of your real properties located at Matina Aplaya, Purok 6, Davao City to the Matina Aplaya Shanghai Village Homeowners Association, Inc. is exempt from the payment of capital gains tax and the expanded withholding tax. However, since only 19,643 square meters of the total are (26,908 sq.m.) sold to the Matina Aplaya Shanghai Homeowners Association, Inc. are to be occupied by its 195 registered and qualified members/beneficiaries (covers both the actual occupants and those who are about to transfer) as certified by the NHA and listed in its approved masterlist of beneficiaries and loan appointment, and as indicated in the subdivision plan, then, only this portion (19,643 sq. m.) of the total area sold is exempt from the payment of capital gains tax and expanded withholding tax. Moreover, it is observed that documentary stamp tax is not one of the taxes covered by the tax exemption clause under Section 32 of R.A. 7279. Such being the case, you are liable to pay the documentary stamp tax on the document conveying the property to the Association under the CMP as imposed under consideration paid by the association to you. JOSE U. ONG Commissioner of Internal Revenue