BIR Ruling No. 058-10

September 15, 2010 BIR RULING NO. 058-10 RA 7279; BIR Ruling No. 398-93; BIR Ruling No. DA-468-98; BIR Ruling No. [SH-(041)317-09]; BIR Ruling No. [SH-(042)323-09] Southeast People's Village Homeowners Association, Inc. Blk. 6 Lot 6 SEPVHOAI Daang Manunuso Ibayo-Tipas, Taguig City Attention: Mr. Ricardo L. Infante President Gentlemen : This refers to your letter dated June 18, 2010 requesting on behalf of Southeast People's Village Homeowners Association, Inc. for an exemption from the payment of capital gains tax and documentary stamp tax relative to the transfer/individualization of title of two (2) parcels of land from Southeast People's Village Homeowners Association, Inc. in favor of its qualified member-beneficiaries pursuant to Republic Act 7279 otherwise known as the "Urban Development and Housing Act of 1992". IHTASa It is represented that Southeast People's Village Homeowners Association, Inc. with Taxpayer's Identification No. 293-667-526-000, is the registered owner of two (2) parcels of land located at Elisco Road, Bo. Tipas, Taguig, Metro Manila (now Daang Manunuso, Ibayo-Tipas, Taguig City) and covered by Transfer Certificate of Title Nos. T-26956 and T-26957 (now C-10579 to C-10778 and C-10859 to C-10904) issued by the Registry of Deeds for the Province of Rizal; that the aforesaid lots were acquired through a loan under the Community Mortgage Program (CMP) of the Social Housing Finance Corporation (SHFC);that said project was taken-out/paid on August 3, 1998 in the amount of PhP7,947,787.21; and that Southeast People's Village Homeowners Association, Inc. is now in the process of subdividing the purchased properties to its member-beneficiaries. In support of its request, Southeast People's Village Homeowners Association, Inc. has completely submitted on July 12, 2010 the following documents: 1) Written Application for Exemption filed with the Law Division; 2) Certified true copy of the Transfer Certificate of Title (TCT) and Tax Declaration of the properties to be transferred; 3) Certification from the Social Housing Finance Corporation (SHFC) that the property was acquired through CMP; 4) Certified true copy of the Articles of Incorporation of the community association; 5) Certified true copy of the Masterlist of qualified beneficiaries duly certified by the SHFC; 6) TIN of the Homeowner Association; 7) Certified duplicate original of the Deed of Sale to the community association; 8) Location plan of the lots sold to the community association; and 9) Other pertinent documents. CSaHDT In reply, please be informed that the transfer in favor of your individual member-beneficiaries of the said subdivided properties is not subject to either the capital gains tax imposed under Section 27 (D) (5) of the Tax Code of 1997, as amended, or the creditable withholding tax imposed under Revenue Regulations No. 2-98, as amended, implementing Section 57 (B) of the same Code, considering that the said transfer of properties is without any consideration since it is merely a formality to finally effect the transfer of the said properties to its member-beneficiaries who actually bought the same from the former owner through your Association. In other words, the association is in fact transferring the ownership of the properties to its member-beneficiaries who actually own the same. Furthermore, the said transfer is not subject to the donor's tax imposed under Section 99 of the Tax Code of 1997, since there is no donative intent or intention on your part to donate the said properties to said member-beneficiaries, considering that you could not donate property the ownership of which belong to the donees (member-beneficiaries) themselves. (BIR Ruling DA-468-98 dated October 29, 1998) It is noted that under Section 196 of the Tax Code of 1997, the deeds or documents subject to the documentary stamp tax imposed therein are those where the realty sold shall be granted, assigned, transferred, or otherwise conveyed to a purchaser or purchasers or to any other person or persons designated by such purchaser or purchasers, thereby excluding from its purview the instant case considering that the supposed purchasers are actually the owners thereof. Besides, no consideration is involved in said transaction upon which the tax imposed could be based. Accordingly, the transfer of title of said properties in favor of your member-beneficiaries is not subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. However, the notarial acknowledgment to said deed of conveyance is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the Tax Code of 1997. (BIR Ruling No. 398-93 dated October 11, 1993) . It is, however, understood that the Certificate Authorizing Registration (CAR) shall only be issued after the submission of the requirements provided under RMO 15-2003 and after it is established upon proper verification by the Revenue District Officer (RDO) concerned that, considering the rules on valuation of real property, the actual selling price per sale transaction of the lots in this case does not exceed P400,000.00 for each qualified beneficiaries." (BIR Ruling No. [SH-(041)-317-09] dated May 15, 2009 and BIR Ruling No. [SH-(042)-323-09] dated May 20, 2009) AEIcSa 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 of Internal Revenue