BIR Ruling No. 053-15

February 27, 2015 BIR RULING NO. 053-15 RA No. 7279; BIR Ruling No. 109-13; BIR Ruling No. 304-13 Samahang Magkakapitbahay sa Balubad Settlement Homeowners Association, Inc. Kabayani Road, Balubad, Nangka, Marikina City Attention: Ceasar L. Fazon President Gentlemen : This refers to the letter of Ma. Ana R. Oliveros, President of Social Housing Finance Corporation (SHFC) dated November 24, 2014, endorsing the sale transaction between T.Q.G. Enterprises, Inc. and Samahang Magkakapitbahay sa Balubad Settlement 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 T.Q.G. Enterprises, Inc. (TIN 000-502-765-000) (hereinafter referred to as Landowner) is the registered owner of a parcel of land, identified as Lot 66-A-1-A-2-A-1-B-13 of the subdivision plan Psd-00-071716, being a portion of Lot 66-A-1-A-2-A-1-B, Psd-004334, LRC Rec. No. 7672 covered by Transfer Certificate of Title (TCT) No. 473627 issued by the Registry of Deeds for the Marikina City. The aforesaid property is situated at Brgy. Nangka, Marikina City with an area of One Thousand Nine Hundred Three square meters (1,903 sq.m.),more or less. Samahang Magkakapitbahay sa Balubad Settlement Homeowners Association, Inc. (TIN 249-440-089-000),on the other hand, is a homeowner's organization registered with the Housing and Land Use Regulatory Board (HLURB).On September 24, 2014, T.Q.G. Enterprises, Inc.,duly represented by its General Manager, Teresa R. Tuason and Samahang Magkakapitbahay sa Balubad Settlement Homeowners Association, Inc.,executed a Deed of Absolute Sale whereby the former transferred and conveyed One Thousand Seven Hundred Sixty Three and 7/100 square meters (1,763.07 sq.m.) portion of the subject property to Samahang Magkakapitbahay sa Balubad Settlement Homeowners Association, Inc. at an agreed price of Two Million Two Hundred Three Thousand Eight Hundred Thirty Seven Pesos and 50/100 (P2,203,837.50) under Community Mortgage Program (CMP) of the SHFC. Pursuant to the certification issued by SHFC, 1,763.07 sq.m. out of 1,903 sq.m. covered by TCT No. 473627 actually comprise a CMP Project and shall be proportionately distributed to the association's qualified member-beneficiaries. 1 For this purpose, Samahang Magkakapitbahay sa Balubad Settlement 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).Documentary Stamp Tax (DST) due on the sale has been paid. aEDCSI In support of its request, Samahang Magkakapitbahay sa Balubad Settlement Homeowners Association, Inc. has completely submitted on August 1, 2014 the following documents: 1) SHFC letter application for tax exemption; 2) Certification of the President of the SHFC that the subject properties actually comprise 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 Properties 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 landowner who sold his property for use in a socialized housing project is exempt from the payment of capital gains tax. Such being the case, the sale by the landowner to Samahang Magkakapitbahay sa Balubad Settlement Homeowners Association, Inc. of the 1,763.07 sq.m. portion out of 1,903 sq.m. covered by TCT No. 473627 is exempt from the capital gains tax. AaCEDS Upon issuance of this letter of exemption, and upon registration of the document of sale, a lien on the Certificates 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 properties, to the effect that the said properties 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. 32 of RA 7279. Accordingly, the landowner is liable to pay the documentary stamp tax on the documents conveying the afore-stated properties 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) Moreover, under Section 109 (1) (P) of the Tax Code of 1997, as amended by R.A. 9337, the sale of real properties utilized for low-cost and socialized housing as defined by R.A. No. 7279 shall be exempt from value-added tax (VAT), thus, the sale of the 1,763.07 sq.m. portion out of 1,903 sq.m. covered by TCT No. 473627 by the landowner to Samahang Magkakapitbahay sa Balubad Settlement Homeowners Association, Inc. is exempt from the imposition of VAT. (BIR Ruling No. 304-2013 dated August 6, 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 titles 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 RMO 15-2003. (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. SaHTCE Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue ANNEX Samahang Magkakapitbahay sa Balubad Settlement Homeowners Association, Inc. Kabayani Road, Balubad, Nangka, Marikina City Name of Beneficiary Blk. No. Lot No. Total Area (sq.m.) 1 Schied, Michael Dela Cruz 1 1 37.86 2 Esperas, Marju Villalobos 1 3 36.22 3 Besales, Glenmer Eleuterio 1 4 31.28 4 Domasig, Marisyl Margallo 1 5 37.86 5 De Paz, Mary Jane Pocsidio 1 6 46.09 6 Tan, Aristotle Patricio 2 2 32.92 7 Aldeza Jr.,Eleuterio Belen 2 3 32.92 8 Garcia Jr.,Jesusimo Alberto 2 4 32.92 9 Jimenez, Imelda Garcia 2 5 32.92 10 Marfil, Rey Pilapil 2 6 32.92 11 Contreras, John Michael Malabanan 2 7 32.92 12 Lachica, Liza Gaa 2 8 32.92 13 Ela, Juanito Candelaria 2 9 34.57 14 Reodique Jr.,Julius Recta 2 10 32.92 15 Evangelista, Leonardo Delos Santos 2 11 32.92 16 Abayon, Edwin Sapungan 2 12 32.92 17 Ordaniel, Elvira Moniva 2 13 32.92 18 Songcuan, Jelly Rojo 2 14 32.92 19 Dejecacion, Nelson Suarez 2 15 32.92 20 Suarez, Edith Moniva 2 16 34.57 21 Gelarzo, Rodjean Marie Suarez 2 17 32.92 22 Gelarzo, Richard Suarez 2 18 32.92 23 Guyada, Priscilla Balmaceda 2 19 32.92 24 Oberio, Ana Estelloso 2 20 32.92 25 Gupit, Rico Duran 2 22 32.92 26 Sildo, Jeros Malabarbas 2 23 32.92 27 Faciol, Leonita Masilang 2 24 70.79 28 Catalan, Renente Sanchez 3 2 32.92 29 Gloria, Elisa Aonuevo 3 3 31.28 30 Lorilla, Evelyn Del Pilar 3 4 34.57 31 Rey, Jose Pareo 3 5 29.63 32 Mabanan, Primitivo Abaes 3 6 32.92 33 Dio, Domingo Jesalva 3 7 34.57 34 Tuble, Marcelo Tromata 3 8 29.63 35 Ursal, Edgardo Ylanan 3 9 31.28 36 Besales, Ma. Gelena Eleuterio 3 10 31.28 37 Pujante, Jennalyn Pocsidio 3 11 31.28 38 Pocsidio Jr.,Rodolfo Madarang 3 12 41.15 39 Dela Cruz, Imelda Macalalag 3 13 31.28 40 Quiros, Bambie Deles 3 14 36.22 41 Villasanta, Virgie Aragon 3 15 36.22 42 Queros, Precita Sisor 3 16 34.57 43 Evangelista, Tirso Abellana 3 17 39.51 44 Cruz, Christian Villojan 3 18 37.86 45 Barcenas, Nancy Torzar 3 19 36.22 46 Avellana, Xelee Flores 3 20 39.51 47 Flores, Xandra Arcega 3 21 36.22 48 Pocsidio, Emelita Madarang 3 22 36.22 49 Fazon, Julius Cesar Sancio 3 23 41.15 50 Fazon, Ceazar Lelis 3 24 42.80 Footnotes 1. See Annex for the masterlist of qualified beneficiaries.