BIR Ruling No. 066-11

March 9, 2011 BIR RULING NO. 066-11 RA 7279; BIR Ruling No. 374-92; BIR Ruling No. SH-(005) 071-09; BIR Ruling No. SH-(012) 052-10 Office of the Mayor 3rd Floor High Rise Building Elliptical Road, Diliman, Quezon City Attention: Herbert M. Bautista City Mayor Gentlemen : This refers to your letter dated August 12, 2010 requesting for a ruling that the sale by Fermina S. Oviedo of her property to the Quezon City Government intended for the latter's socialized housing program is exempted from payment of capital gains tax and other fees allowed under R.A. No. 7279, otherwise known as the Urban Development and Housing Act of 1992. Documents submitted show that Fermina S. Oviedo with Taxpayer's Identification No. 125-573-532-000 is the registered owner of a parcel of land covered by Transfer Certificate of Title (TCT) No. N-224682 and designated as Lot No. 9-B of Psd-00-036995 issued by the Registry of Deeds for the Quezon City. The aforestated lot is located at Brgy. Commonwealth containing an area of 15,651 sq.m. more or less. The Quezon City Government with Taxpayer's Identification No. 001-968-647-000, on the other hand, is a public entity created and existing under the laws of the Philippines and is desirous of purchasing the said property for socialized housing purposes. That the City Council adopted Resolution No. SP-4989 S-2010, (PR-2010-38), authorizing the City Mayor to enter into a contract to purchase the above property, to be utilized for various development projects like socialized housing, roads, schools and other infrastructures. That a Deed of Absolute Sale was executed by and between the afore-named parties transferring the subject realty in consideration for fifty million four thousand nine hundred forty five thousand pesos (P50,004,945.00) In reply, please be informed that pursuant to Sections 20 of Republic Act (RA) No. 7279, pertinent portions of which state that: cACEHI "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: xxx xxx xxx 2) Capital gains tax on raw lands use for the project; xxx xxx xxx" the owner of the raw land is exempt from the payment of capital gains tax or the withholding tax under Revenue Regulations No. 12-98, as amended, on the conveyance on the portion of land which will be actually used for socialized housing project by the Quezon City government pursuant to Resolution No. SP-4989 S-2010, (PR-2010-38). 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. However, the sale is subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997 based on the actual consideration of the property transferred, considering that one of the contracting parties is the Government. (BIR Ruling No. SH-(005) 071-09 dated February 4, 2009; BIR Ruling No. SH-(012) 052-10 dated June 22, 2010) 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, including proof of payment of documentary stamp tax. 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. cACHSE Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue