Sale by Philippine Bank of Communications of Real Property to the United Lico Homeowners Association, Inc., A Non-Stock, Non-Profit Community Organization Duly Registered with the Securities and Exchange Commission in accordance with the Community Mortgage Program Initiated by the National Housing Authority Exempt from Capital Gains Tax

April 12, 1996 BIR RULING NO. 051-96 R.A. 7279 000-00 051-96 United Lico Homeowners Association, Inc. 2701 Lico Street Tondo, Manila Attention: Mr . Eduardo C . Vicencio President Gentlemen : This refers to your letter dated November 27, 1995 requesting for a ruling that the sale by Philippine Bank of Communications of its real property, situated at Lico Street, Tondo, Manila, to the United Lico Homeowners Association, Inc., a non-stock, non-profit community organization duly registered with the Securities and Exchange Commission (SEC) in accordance with the Community Mortgage Program (CMP) initiated by the National Housing Authority is exempt from capital gains tax pursuant to Section 32(a) and (b) of R.A. 7279 which was approved on March 24, 1992 and published in the March 28, 1992 issue of the Philippine Times Journal and Malaya, newspapers of general circulation. cdt It appears that the Community Mortgage Program (CMP) is a mortgage financing program of the National Home Mortgage Finance Corporation (NHMFC) which assists legally organized associations of underprivileged and homeless citizens to purchase and develop a tract of land under the concept of community ownership; through a Letter Guaranty by said Government Financing Institution the landowner executes a Deed of Sale to the Association which stands as the borrower and debtor to the extent of the total amount paid by NHMFC to the landowner; that in the instant case, the property being sold to the United Lico Homeowners Association, Inc. is covered by TCT No. 122795; that the said transaction was certified by the National Home Mortgage Finance Corporation as an approved project under the Community Mortgage Program (CMP) of the government; and that field verification conducted in this case disclosed that the occupants are registered members of the association and are qualified beneficiaries. In reply, please be informed that pursuant to Section 32 of R.A. No. 7279, pertinent portion of which reads: "Section 32. Incentives To encourage 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 "xxx xxx xxx" the landowner who sells its property to the association pursuant to the Community Mortgage Program is exempt from the payment of capital gains tax and from the expanded withholding tax under Revenue Regulations No. 1-90, as amended. Such being the case, the sale of its aforesaid property to the United Lico Homeowners Association, Inc. is exempt from the capital gains tax and the expanded withholding tax. Upon issuance of this letter of exemption, and upon registration of the document of sale, a lien on the Transfer Certificate of Title of the parcel of land to be issued in the name of the United Lico Homeowners Association, Inc. shall be caused to 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 R.A. No. 7279. Moreover, inasmuch as the area sold to the United Lico Homeowners Association, Inc. has been declared and certified by the NHA to be covered by the Area for Priority Development (APO) site, the same shall be exempt from documentary stamp tax under Section 25 of R.A. 7279 stating "Sec. 25. Benefits . In addition to the benefit provided under existing laws and other related issuances to occupants of areas for priority development, zonal improvement program sites and slum improvement and resettlement program sites, such occupants shall be entitled to priority in all government projects initiated pursuant to this Act. They shall also be entitled to the following support services: cdta "xxx xxx xxx "(c) Exemption from the payment of documentary stamp tax, registration fees, and other fees for the issuance of transfer certificate of titles; "xxx xxx xxx" Such being the case, the qualified beneficiaries of the socialized housing project shall not be liable to the payment of documentary stamp tax imposed under Sec. 196 of the Tax Code, as amended. However, it is observed that the documentary stamp tax is not one of the taxes covered by the tax exemption clause under Sections 20 and 32 of R.A. No. 7279. Such being the case, the landowner is liable to pay the documentary stamp tax on the document conveying the property to the association under the CMP as imposed under Sec. 196 of the Tax Code, as amended, based on the actual consideration paid by the association to the landowner. LLpr Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue