BIR Ruling No. 054-15

February 27, 2015 BIR RULING NO. 054-15 RA 7279; BIR Ruling No. 386-2014 Bumbaran Development Corporation Suite 205 Borres Building No. 4 Ilang-ilang Street, New Manila, Quezon City Attention: Brigido R. Simon, Jr. President Gentlemen : This refers to your letter dated May 19, 2014 requesting issuance of Certificate of Tax Exemption for the AFP/PNP/BJMP Housing Program in Brgy. Sarmiento, Parang, Maguindanao pursuant to Republic Act (R.A.) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". Documents submitted show that National Housing Authority (NHA), is the absolute and registered owner of a parcel of land, identified as Lot 4313-E-1, of the subdivision plan Psd-ARMM-11-002480, being a portion of Lot 4313-E, Psd-12,010458 covered by Transfer Certificate of Title (TCT) No. T-39195 1 issued by the Registry of Deeds for the Province of Maguindanao, located at Brgy. Sarmiento, Parang, Maguindanao with an aggregate area of Ninety Seven Thousand Five Hundred Ninety Three square meters (97,593 sq.m.). On October 4, 2012, a Contract Agreement was executed by and between Bumbaran Development Corporation (TIN: 228-753-802-000) and AFP Housing Homeowners Association, Inc. and PNP Housing Homeowners Association, Inc., a homeowner's organization registered with the Housing and Land Use Regulatory Board (HLURB), whereby between Bumbaran Development Corporation has agreed to sell in an amount not exceed Two Hundred Forty Thousand Pesos (P240,000.00) for every developed lot and completed housing unit per family, to AFP Housing Homeowners Association, Inc. and PNP Housing Homeowners Association, Inc.'s individual members the developed lots and completed housing units covered by the said Titles under the Community Initiative Approach Program (CIAP) of the National Housing Authority (NHA). Moreover, on October 4, 2012, a Memorandum of Agreement (MOA) for developed lots and completed housing units, was executed by and among Bumbaran Development Corporation, as the developer, AFP Housing Homeowners Association, Inc. and PNP Housing Homeowners Association, Inc., as the beneficiaries, and the NHA, as the implementing government agency for the AFP/PNP Housing Program as cited under Administrative Order No. 9 dated April 11, 2011. Under the MOA, members of the AFP Housing Homeowners Association, Inc. and PNP Housing Homeowners Association, Inc., shall be provided by the NHA with a financial grant for the acquisition house and lot packages in the AFP/PNP Housing Project through the CIAP in the amount not to exceed Php240,000.00 per member/family for a House and Lot Package of Forty square meters (40.00 sq.m.) lot and Twenty Two square meters (22.00 sq.m.) floor area. TDAHCS On October 30, 2012, Bumbaran Development Corporation executed a Deed of Conveyance in favor of the NHA, whereby the former conveyed One Thousand Five Hundred (1,500) developed lot packages with the aggregate area of Sixty Thousand square meters (60,000 sq.m.) on TCT No. T-39195 at an agreed price of One Hundred Seventy Two Million Five Hundred Thousand Pesos (P172,500,000.00). In reply, please be informed that pursuant to Sections 19 and 20 of Republic Act (RA) No. 7279, pertinent portions of which state that: "Sec. 19. Incentives for the National Housing Authority. The National Housing Authority, being the primary government agency in charge of providing housing for the underprivileged and homeless, shall be exempted from the payment of all fees and charges of any kind, whether local or national, such as income and realty taxes. All documents or contracts executed by and in favor of the National Housing Authority shall also be exempt from the payment of documentary stamp tax and registration fees, including fees required for the issuance of transfer certificates of title. "Sec. 20. Incentives for Private Sector Participating in Socialized Housing . To encourage greater private sector participation in socialized housing and further reduce 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) Project-related income taxes; (2) Capital Gains Tax; (3) Value-added tax for the project contractor concerned;" the landowner/developer of properties who sells its properties for use in a socialized housing project are exempt from the payment of the capital gains tax and project-related income taxes. Such being the case, the transfer of 1,500 developed lots/house packages on the Sixty Thousand square meters (60,000 sq.m.) portion of TCT No. T-39195 by Bumbaran Development Corporation to NHA is exempt from capital gains tax, project-related income taxes and consequently from withholding tax. (BIR Ruling No. 386-2014 dated October 8, 2014) Moreover, pertinent portions of RMC No. 42-01 dated October 5, 2001, provide, viz. : xxx xxx xxx A. National Housing Authority (NHA) The NHA, being the primary government agency in charge of providing housing for the underprivileged and homeless citizens shall be exempted from the payment of the following national internal revenue taxes: TSIEAD (1) . . . (2) Documentary stamp tax on sales transactions executed by and in favor of the NHA in connection with socialized housing projects. Since Section 19 of R.A. 7279 exempts "all documents or contracts executed by and in favor of the NHA," the exemption from documentary stamp tax extends to the other party (either seller or buyer) that is dealing or transacting with the NHA. xxx xxx xxx The exemption from documentary stamp tax of NHA in connection with any of its socialized housing project extends to the other party (either seller or buyer) that deals or transacts with the NHA. Consequently, since NHA is a party to the sale, no documentary stamp tax shall be due on such sale, either on NHA or the party with which NHA is transacting. Accordingly, the transfer by Bumbaran Development Corporation to NHA of the 1,500 developed lots/house packages on the Sixty Thousand square meters (60,000 sq.m.) portion of TCT No. T-39195, is likewise exempt from documentary stamp tax imposed under Section 196 of the Tax Code of 1997, as amended. (BIR Ruling No. 386-2014 dated October 8, 2014) Upon application for exemption, a lien on the title of 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 socialized housing project pursuant to RA 7279. 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 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) after the submission of the requirement provided under RMO 15-2003. Moreover, Bumbaran Development Corporation is likewise exempt from the payment of VAT on its gross receipts from the said project, involving the transfer of 1,500 developed lots/house packages on the Sixty Thousand square meters (60,000 sq.m.) portion of TCT No. T-39195. However, its purchases of goods/articles shall be subject to VAT, even if the said purchases are to be used for the socialized housing project, since VAT is an indirect tax which can be passed on by the seller of the goods/services. It shall be understood that Bumbaran Development Corporation must issue non-VAT official receipts on its gross receipts from the said socialized housing project. 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. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner Bureau of Internal Revenue Footnotes 1. Formerly TCT No. T-38960 from TCT No. T-8004.