Tax Consequence of Reconveyance of Property Transferred Previously Under Pag-ibig's UHLP Program

December 14, 2000 BIR RULING NO. 068-00 24 (D) (1) 000-00 Citizens Development, Inc. 6/F, Homeowners Savings & Loan Bldg. 49 Tomas Morato Avenue Quezon City Attention: Mr . Rodelio M . Balboa CDI-Documentation Gentlemen : This refers to your letter dated January 19, 2000 stating that Ms. Isabelita U. Macatuno is a buyer of a parcel of land owned by Citizen Development, Inc., Owner/Developer of Villa Grande Subdivision, located at Barangay Lambakin, Marilao, Bulacan; that she is qualified to avail of a house and lot package under the UHLP program of Pag-ibig; that it is a requirement of Pag-ibig to transfer the Title of the said property in the name of the buyer under the UHLP account; that upon processing of the said requirement, Ms. Macatuno decided to cancel/withdraw her application with Pag-ibig; that the developer already transferred the Title in favor of Ms. Macatuno; that the developer is now in the process of having the Title to the said property transferred back in its name upon revoking the previous Deed of Absolute Sale; and that the Revenue District Office requested you to secure a ruling exempting the said account from paying the taxes on the reconveyance in your favor of the Title to said property. DCATHS Based on the foregoing representations and documents submitted, you are now requesting exemption from the payment of capital gains tax and documentary stamp tax on the reconveyance in your favor by Ms. Isabelita U. Macatuno of the realty you transferred previously in her favor under the UHLP program of Pag-ibig. In reply, please be informed that under Section 24(D)(1) of the Tax Code of 1997, a final tax of six percent (6) based on the gross selling price or current fair market value as determined in accordance with Section 6(E) of the Tax Code of 1997, whichever is higher, is imposed upon capital gains tax presumed to have been realized from the sale, exchange, or other disposition of real property located in the Philippines classified as capital assets, including pacto de retro sales and other forms of conditional sales by individuals, including estates and trusts. From the foregoing provisions of Section 24(D)(1) of the Tax Code of 1997, it seems that the sale of the said property in your favor by Ms. Isabelita U. Macatuno is subject thereto. However, a closer perusal of the said transaction would reveal that the property subject of the same is the same property which you previously transferred in her favor under the UHLP Pag-ibig Program which, as represented, one of the requirements of which is that the Title to the property being sold should first be transferred in the name of the buyer. In other words, the transfer of Title of the property being sold should be complied with in order to fall under the UHLP Pag-ibig program. Considering, however, that after Title to the property in question had been transferred in the name of Ms. Isabelita U. Macatuno, she decided to cancel/withdraw her application with Pag-ibig, that prompted you to request that she in turn should reconvey the same in your favor, hence the instant Deed of Reconveyance. Such being the case, this Office is of the opinion as it hereby holds that the reconveyance of the said property by Ms. Isabelita U. Macatuno in your favor on December 7, 1999 is exempt from the payment of capital gains tax imposed under Section 24(D)(1) of the Tax Code of 1997 and documentary stamp tax prescribed under Section 196 of the same Code. However, the same is subject to the documentary stamp tax of P15.00 as imposed by Section 188 of the Tax Code of 1997 on acknowledgments. (BIR Ruling No. 042-97 dated April 8, 1997) The initial payments, however, made by Ms. Isabelita U. Macatuno which were paid to you but which you did not return to her anymore is subject to income tax and should have been reported in your income tax return in the year received. 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.) DAKILA B. FONACIER Commissioner of Internal Revenue