BIR Ruling No. 082-15

March 30, 2015 BIR RULING NO. 082-15 RA 7279; RR 11-97; BIR Ruling No. 473-2014 Mever Construction Brgy. Pindangan West Alcala, Pangasinan Attention: Maybelene V. Mencias Gentlemen : This refers to the letter of Atty. Sinforoso R. Pagunsan, Chief of Staff, Office of the General Manager of the NHA dated May 26, 2014 requesting issuance of Certificate of Tax Exemption for the acquisition of developed lots and completed housing units in Norzagaray Heights Resettlement Project located at Bitungol, Norzagaray, Bulacan pursuant to Republic Act (R.A.) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". Documents submitted disclose that Norfil Foundation, Inc. (TIN 001-005-576-000) (hereinafter referred to as Landowner) is the registered owner of ninety eight (98) parcels of land covered by the following Transfer Certificates of Title (TCT), to wit: TCT No. Area (sq.m.) 1 T-165255 268 2 T-165256 245 3 T-165257 289 4 T-165258 279 5 T-165259 253 6 T-165260 250 7 T-165261 262 8 T-165262 271 9 T-165263 265 10 T-165264 257 11 T-165265 251 12 T-165266 247 13 T-165267 244 14 T-165268 275 15 T-165269 260 16 T-165270 305 17 T-165271 273 18 T-165272 251 19 T-165273 240 20 T-165274 240 21 T-165275 341 22 T-165276 271 23 T-165277 306 24 T-165278 247 25 T-165279 240 26 T-165280 259 27 T-165281 240 28 T-165282 240 29 T-165283 240 30 T-165284 240 31 T-165285 240 32 T-165286 240 33 T-165287 240 34 T-165288 240 35 T-165289 240 36 T-165290 240 37 T-165291 240 38 T-165292 240 39 T-165293 240 40 T-165294 240 41 T-165295 240 42 T-165296 240 43 T-165297 240 44 T-165298 240 45 T-165299 240 46 T-165300 243 47 T-165301 240 48 T-165302 240 49 T-165303 240 50 T-165304 241 51 T-165305 283 52 T-165306 260 53 T-165307 280 54 T-165308 337 55 T-165309 352 56 T-165310 260 57 T-165311 287 58 T-165312 240 59 T-165313 247 60 T-165314 240 61 T-165315 240 62 T-165316 240 63 T-165317 240 64 T-165318 240 65 T-165319 240 66 T-165320 240 67 T-165321 240 68 T-165322 240 69 T-165323 240 70 T-165324 240 71 T-165325 240 72 T-165326 303 73 T-165327 288 74 T-165328 240 75 T-165329 245 76 T-165330 331 77 T-165331 290 78 T-165332 300 79 T-165333 290 80 T-165334 300 81 T-165335 319 82 T-165336 300 83 T-165337 312 84 T-165338 296 85 T-165339 252 86 T-165340 240 87 T-165341 240 88 T-165342 240 89 T-165343 249 90 T-165344 240 91 T-165345 240 92 T-165346 240 93 T-165347 397 94 T-165348 241 95 T-165349 240 96 T-165350 262 97 T-165351 2,786 98 T-179505 93,305 Total Area 121,065 ======= all issued by the Registry of Deeds for the Meycauayan Branch. The aforesaid properties are situated at Brgy. Minuyan, Norzagaray, Bulacan. AaSHED On August 1, 2013, a Deed of Absolute of Sale was executed by and between the landowner and the NHA, whereby the landowner transferred and conveyed to NHA the above mentioned properties for Forty Eight Million Pesos (P48,000,000.00). On August 2, 2013, a Contract Agreement was executed by and between Mever Construction (TIN 103-994-355-000) and Norzagaray Heights Homeowners Association, Inc., a homeowner's organization registered with the Housing and Land Use Regulatory Board (HLURB) with Certificate of Registration No. 20075, whereby the former offers its services to the latter to undertake the construction of housing units in the Norzagaray Heights Resettlement Project for Two Hundred Forty Thousand Pesos (P240,000.00) for every developed lot and completed housing unit per family, which shall be financed by the National Housing Authority (NHA) under the Community Initiative Approach Program (CIAP). Moreover, on August 15, 2013, a Memorandum of Agreement 1 (MOA) was executed by and among Mever Construction, Norzagaray Heights Homeowners Association, Inc., as the beneficiaries, 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 of Metro Manila. Under the MOA, members 2 of the Norzagaray Heights Homeowners Association, Inc. shall be provided by the NHA with a financial grant for the acquisition of 500 developed lots and financing of the acquisition of completed row-house units under Batch 1 through the CIAP 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 housing units. To give effect to the Contract Agreement and MOA, on May 22, 2014, a Deed of Absolute Sale was executed by and between Mever Construction and NHA, whereby the former agreed to sell to the latter, 500 developed lots under Batch 01-2014 with an aggregate area of Twenty Thousand Three Hundred Thirteen square meters (20,313 sq.m.) covered by above mentioned TCTs for Fifty Seven Million Five Hundred Thousand pesos (P57,500,000.00). In reply, please be informed that pursuant to Sections 19 and 20 of 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; CTEaDc (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 in the aforesaid socialized housing project. (BIR Ruling No. 473-2014 dated November 24, 2014) Accordingly, the sale by the landowner to NHA of the subject properties 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 landowners to NHA of the subject property, 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) 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, including proof of payment of documentary stamp tax. Transaction between Mever Construction 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 Mever Construction to NHA of the 500 developed lots under Batch 01-2014, in so far as the aggregate area of Twenty Thousand Three Hundred Thirteen square meters (20,313 sq.m.) portion of the subject properties 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) EHaDIC 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 Mever Construction to NHA of the 500 developed lots under Batch 01-2014 on the Twenty Thousand Three Hundred Thirteen square meters (20,313 sq.m.) portion of the subject properties 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 sale/transfer by Mever Construction of 500 developed lots under Batch 01-2014 on the Twenty Thousand Three Hundred Thirteen square meters (20,313 sq.m.) portion of the subject properties to NHA shall be exempt from VAT. However, its purchases of goods/articles 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 Mever Construction 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 (Norzagaray Heights Resettlement Project, Brgy. Bitungol, Norzagaray, 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 of Metro Manila.