Applicability of Guidelines in Implementation of Zonal Valuation of Real Properties for Housing Project in Novaliches, QC

December 28, 2000 BIR RULING NO. 075-00 Phinma Property Holding Corporation Phinma Building. 166 Salcedo Street Legaspi Village, Makati City Attention: Atty. Mona Lisa M . Vargas Gentlemen : This refers to your follow-up letter dated March 01, 2000 relative to your letter dated June 28, 1999, which was referred to this Office by Revenue Region No. 7, Quezon City by way of its 2nd Indorsement dated November 11, 1999, requesting, in effect, for a ruling that the Guidelines in the Implementation of Zonal Valuation of Real Properties for RD No. 28-Novaliches should not be applied to the housing project located in Zabarte, Novaliches, Quezon City, in lieu of the Resolution No. 17-97 dated December 1, 1997 approved by the then Commissioner of Internal Revenue. It appears that Phinma Property Holdings Corporation (Phinma) is a domestic Corporation duly registered with the Securities and Exchange Commission (SEC); that Phinma is the developer of a housing project known as the SMILE Citihomes I housing project located at Zabarte, Novaliches Quezon City consisting of 1,595 residential condominium units and commercial condominium units and which was approved by the Housing and Land Use Regulatory Board (HLURB); that the said residential buildings and a separate building for facilities/commercial units are covered by Condominium Certificate of Titles (CCT); that in accordance with the Master Deed of Restrictions of such project, all units, including those in the ground floor, shall be utilized exclusively for residential purposes; that in the above-mentioned guidelines, the zonal values of condominium unit/townhouse, the ground floor of the said residential condominium shall be classified as commercial and twenty percent (20%) of the established value shall be added thereto; and that on December 1, 1997, in a Memorandum for the then Commissioner of Internal Revenue, the Technical Committee on Real Property Valuation, after evaluation of the recommendation of Sub-Technical Committee on Real Property Valuation, has resolved that the properties in SMILE Citihomes I, be valued at: 1. Socialized "Residential Condominium (RC)" P8,750.00/sq.m 2. Non-Socialized "Residual Condominium (RC)" 10,000.00/sq.m. 3. Commercial Condominium (CC) 16,000.00/sq.m. In reply thereto, please be informed that Section 6(E) of the Tax Code of 1997 provides that the Commissioner is hereby authorized to divide the Philippines into different zones or areas and shall, upon consultation with competent appraisers both from the private and public sectors, determine the fair market value of real properties located in each zone or area. For purposes of computing any internal revenue tax, the value of the property shall be, whichever is higher of: "(1) the fair market value as determined by the Commissioner; or "(2) the fair market value as shown in the schedule of values of the Provincial and City Assessors." TcHDIA The above section of the Tax Code empowers the BIR Commissioner to determine the fair market value of real properties in specific zones or areas upon consultation with competent appraisers. In the instant case, since the property located at Zabarte, Novaliches, Quezon City is covered by a special zonal value as recommended by the Sub-Technical Committee on Real Property Valuation and which was subsequently resolved by the Technical Committee on Real Property Valuation and approved by the then Commissioner of Internal Revenue on December 1, 1997, is in accordance with the above-mentioned section of the Tax Code. It is therefore the option of this Office that the SMILE Citihomes Housing Project located at Zabarte, Novaliches, Quezon City which are covered by CCT shall not be covered by the Guidelines in the Implementation of Zonal Valuation of Real Properties for RD No. 28-Novaliches but to the special zonal value as recommended by the Technical Committee on Real Property Valuation and approved by the then Commissioner of Internal Revenue. 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