BIR Ruling No. 077-15

March 30, 2015 BIR RULING NO. 077-15 RA 7279; RR 11-97;BIR Ruling No. 473-2014; BIR Ruling No. 304-2013 J.C. Tayag Builders Incorporated Purok 1, Brgy. Panipuan San Fernando, Pampanga Attention: Juanito C. Tayag President Gentlemen : This refers to the letter dated February 11, 2014 of Atty. Sinforoso R. Pagunsan, Chief of Staff, Office of the General Manager of the National Housing Authority (NHA) requesting issuance of Certificate of Tax Exemption for the St. Joseph Ville Resettlement Site located at Brgy. Kaypian, City of San Jose Del Monte, Bulacan pursuant to Republic Act (R.A.) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". Documents submitted show that Sanpa Development Co.,Inc.,(hereinafter referred to as Landowner),is the absolute and registered owner of a parcel of land, identified as Lot 4-E-Lot 1015 of San Jose Del Monte Cadastre, Plan Psu-175039, Amd.;L.R. Case No. SM-41, L.R.C. Record No. N-36394 covered by Transfer Certificate of Title (TCT) No. T-117946 issued by the Registry of Deeds for the Province of Bulacan located at Brgy. Kaypian, City of San Jose Del Monte, Bulacan with an aggregate area of Sixty Nine Thousand Four Hundred Sixty Six square meters (69,466 sq.m.). On November 11, 2013, a Deed of Absolute of Sale was executed by and between the landowner and the NHA, whereby the landowner transferred and conveyed Thirty Two Thousand Twenty Seven square meters (32,027 sq.m.) portion of the subject property to NHA for Six Million Four Hundred Five Thousand Four Hundred Pesos (P6,405,400.00). On November 15, 2013, a Contract Agreement was executed by and between J.C. Tayag Builders Incorporated (TIN 007-601-926-000) and St. Joseph Ville Homeowner's Association, Inc. (SJHOAI),a homeowner's organization registered with the Housing and Land Use Regulatory Board (HLURB) whereby the former has offered to sell the developed lots and completed housing units under the Community Initiative Approach Program (CIAP) of the National Housing Authority (NHA) for Php240,00.00 * per member/family. Moreover, on November 22, 2013, a Memorandum of Agreement 1 (MOA) was executed by and among J.C. Tayag Builders Incorporated, SJHOAI, as the beneficiary, and the NHA, as the lead agency in the implementation of the National Resettlement Programs of the government for FY 2013 and to ensure the timely, peaceful and orderly relocation and resettlement of the informal settler families along danger areas, those affected by calamities and those affected by the clearing of waterways, esteros and infrastructure projects of the government in the City of San Jose Del Monte, Bulacan. Under the MOA, members of the SJHOAI 2 shall be provided by the NHA with a financial grant for the acquisition of 483 developed lots under Batch 1-2013 and financing of the acquisition of developed lots and completed housing units in the amount not to exceed One Hundred Fifteen Thousand Pesos (P115,000.00) per lot and One Hundred Twenty Five Thousand Pesos (P125,000.00) per row-house unit. On January 7, 2014, J.C. Tayag Builders Incorporated and the NHA executed a Deed of Absolute Sale whereby the former, transferred and conveyed 483 developed lots under Batch 1-2013 with an aggregate area of Nineteen Thousand Three Hundred Twenty square meters (19,320 sq.m.) to NHA at an agreed price of Fifty Five Million Five Hundred Forty Five Pesos (P55,545,000.00). HICSTa In reply, please be informed that pursuant to Sections 19 and 20 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 on raw lands used for the project; (3) Value-added tax for the project contractor concerned;" xxx xxx xxx" 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: (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 Sale by the Landowner to NHA The owner of the raw land is exempt from the payment of capital gains tax or the withholding tax under Revenue Regulations No. 2-98, as amended, on the conveyance of the parcel of land for use to the aforesaid socialized housing project. (BIR Ruling No. 473-2014 dated November 24, 2014) Accordingly, the sale by the landowner to NHA of 32,027 sq.m. out of 69,466 sq.m. covered by TCT No. T-117946 is exempt from the payment of capital gains tax imposed under Sec. 24 (D) of the Tax Code of 1997, as amended or creditable withholding tax under Revenue Regulations No. 2-98, as amended. 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 the landowner to NHA of the 32,027 sq.m. out of 69,466 sq.m. covered by TCT No. T-117946 , is, likewise, exempt from the payment of documentary stamp tax under Section 196 of the Tax Code of 1997, as amended. (BIR Ruling No. 473-2014 dated November 24, 2014) Moreover, under Section 109 (1) (P) of the Tax Code of 1997, as amended by R.A. 9337, the sale of real properties utilized for low-cost and socialized housing as defined by R.A. No. 7279 shall be exempt from value-added tax (VAT), thus, the sale of the 32,027 sq.m. out of 69,466 sq.m. covered by TCT No. T-117946 by the landowner to NHA is exempt from the imposition of VAT. (BIR Ruling No. 304-2013 dated August 6, 2013) DcITaC Upon application for exemption, a lien on the titles of the land shall be annotated by the Register of Deeds having jurisdiction over the properties, 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. Transaction between J.C. Tayag Builders Incorporated and NHA The developer of properties who sells its properties for use in a socialized housing project are exempt from the payment of project-related income taxes. Such being the case, the sale of J.C. Tayag Builders Incorporated to NHA of the 483 developed lots under Batch 1-2013 with an aggregate area of 19,320 sq.m. portion of the subject property is concerned, is exempt from the capital gains tax, project-related income taxes and consequently from withholding tax. (BIR Ruling No. 473-2014 dated November 24, 2014) 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 J.C. Tayag Builders Incorporated to NHA of the 483 developed lots under Batch 1-2013 with an aggregate area of 19,320 sq.m. portion of the subject property is concerned, is, likewise, exempt from the payment of documentary stamp tax under Section 196 of the Tax Code of 1997, as amended. (BIR Ruling No. 473-2014 dated November 24, 2014) Pursuant to Section 20 (d) (3) of RA 7279, the transfer of the 483 developed lots under Batch 1-2013 with an aggregate area of 19,320 sq.m. portion of the subject property shall be exempt from VAT. However, the purchases of goods/articles by J.C. Tayag Builders Incorporated 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. Moreover, it shall be understood that J.C. Tayag Builders Incorporated 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 ascertained that the facts are different, then this ruling shall be considered as null and void. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue Footnotes 1. (For Financing the Acquisition of Developed Lots and Financing the Acquisition of Completed Housing Units) St. Joseph Ville Resettlement Project, Brgy. Kaypian, CSJDM, Bulacan. 2. Composed of members/families living in danger areas, those affected by calamities and those affected by the clearing of waterways, esteros and infrastructure projects of the government in the City of San Jose Del Monte, Bulacan.