BIR Ruling No. 080-15

March 30, 2015 BIR RULING NO. 080-15 RA 7279; BIR Ruling No. 386-2014 RFN Construction and Development Corporation Rm. 210 Tia Maria Bldg. C.V. Starr Avenue, Pamplona, Las Pias City Attention: Rafael A. Ilagan President Gentlemen : This refers to your letter dated December 22, 2014, requesting issuance of Certificate of Tax Exemption for the AFP-PNP Housing Program in San Manuel Homes II 1 located at Brgy. Concepcion Palasan, Sariaya, Quezon pursuant to Republic Act (R.A.) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". Documents submitted show that National Housing Authority (NHA), is the registered owner of two (2) parcels of land located at Brgy. Concepcion Palasan, Sariaya, Quezon and covered by the following Transfer Certificates of Title (TCT), to wit: TCT No. Lot No. Tax Declaration No. Area (sq.m.) 066-2014008960 2 966-A-2-A3-B-B-11 36-0027-01897-A 8,331 066-2014008961 3 966-A-2-A3-B-B-12 36-0027-01898-A 30,000 total area 38,331 ====== both issued by the Registry of Deeds for Province of Quezon. On October 22, 2014, a Contract Agreement was executed by and between RFN Construction and Development Corporation (TIN: 000-410-726-000) and AFP Housing Homeowners Association, Inc. and PNP Housing Homeowners Association, Inc., a homeowner's organization registered with the Housing and Land Use Regulatory Board (HLURB), whereby RFN Construction and Development Corporation has agreed to sell in an amount not to exceed Two Hundred Forty Thousand Pesos (P240,000.00) for every developed lot and completed housing unit per family to AFP Housing Homeowners Association, Inc. and PNP Housing Homeowners Association, Inc.'s individual members the developed lots and completed housing units covered by the said Titles under the Community Initiative Approach Program (CIAP) of the National Housing Authority (NHA). Moreover, on October 27, 2014, a Memorandum of Agreement (MOA) 4 for developed lots and completed housing units, was executed by and among RFN Construction and Development Corporation, as the landowner/developer, AFP Housing Homeowners Association, Inc. and PNP Housing Homeowners Association, Inc., as the beneficiaries, and the NHA, as the implementing government agency for the AFP/PNP Housing Program as cited under Administrative Order No. 9 dated April 11, 2011. Under the MOA, members of the AFP Housing Homeowners Association, Inc. and PNP Housing Homeowners Association, Inc., shall be provided by the NHA with a financial grant for the acquisition house and lot packages in the AFP/PNP Housing Project through the CIAP in the amount not to exceed Php240,000.00 per member/family for a House and Lot Package of Forty square meters (40.00 sq.m.) lot and Twenty Two square meters (22.00 sq.m.) floor area. On December 15, 2014, RFN Construction and Development Corporation executed a Deed of Conveyance in favor of NHA, whereby the former will convey Five Hundred (500) developed lot packages on an aggregate area of Twenty Thousand Seven Hundred Two square meters (20,702 sq.m.) of the 38,331 sq.m. covered by TCT Nos. 066-2014008960 and 066-2014008961 at an agreed price of Fifty Seven Million Two Hundred Seventy Thousand Pesos (P57,270,000.00). CSAcTa In reply, please be informed that pursuant to Sections 19 and 20 of R.A. 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; (3) Value-added tax for the project contractor concerned;" the landowner/developer of properties who sell its properties for use in a socialized housing project are exempt from the payment of the capital gains tax and project-related income taxes. Such being the case, the transfer of 500 developed lots/house packages on the Twenty Thousand Seven Hundred Two square meters (20,702 sq.m.) portion of TCT Nos. 066-2014008960 and 066-2014008961 by RFN Construction and Development Corporation to NHA is exempt from capital gains tax, project-related income taxes and consequently from withholding tax. (BIR Ruling No. 386-2014 dated October 8, 2014) 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 tuxes: (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 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 RFN Construction and Development Corporation to NHA of 500 developed lots/house packages on the Twenty Thousand Seven Hundred Two square meters (20,702 sq.m.) portion of TCT Nos. 066-2014008960 and 066-2014008961 , is likewise exempt from documentary stamp tax imposed under Section 196 of the Tax Code of 1997, as amended. (BIR Ruling No. 386-2014 dated October 8, 2014) AEITDH 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. 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. Pursuant to Section 20 (d) (3) of R.A. No. 7279, the transfer of 500 developed lots/house packages on the Twenty Thousand Seven Hundred Two square meters (20,702 sq.m.) portion of TCT Nos. 066-2014008960 and 066-2014008961 shall be exempt from VAT. However, the purchases of goods/articles by RFN Construction and Development Corporation 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. It shall be understood that RFN Construction and Development Corporation 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 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 Footnotes 1. Also known as Happy Valley Homes per NHA's Certification dated February 23, 2015. 2. Formerly: TCT No. T-408754. 3. Formerly: TCT No. T-408753. 4. For 500 developed lots and completed housing units, Happy Valley Homes, Brgy. Concepcion Palasan, Sariaya, Quezon.