BIR Ruling No. 085-15

April 8, 2015 BIR RULING NO. 085-15 RA No. 7279; BIR Ruling No. 109-13; BIR Ruling No. 304-13 Gothong Road Homeowners Association, Inc. Gothong Road, Brgy. Subangdaku, Mandaue City Attention: Monica G. Bani President Gentlemen : This refers to the letter of Ma. Ana R. Oliveros, President of Social Housing Finance Corporation (SHFC) dated March 6, 2013, endorsing the sale transaction between Green Coil Marketing Corporation and Gothong Road Homeowners Association, Inc. for exemption from the payment of Capital Gains Tax and other taxes in accordance with the Republic Act (RA) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". Documents submitted disclose that Green Coil Marketing Corporation (TIN: 239-255-805-000) is the registered owner of a parcel of land, identified as Lot 966-A-4 of the subdivision plan, Psd-07-051501, being a portion of Lot 966-A, Psd-07-021-675 covered by Transfer Certificate of Title (TCT) No. MR-4207 T(63866) issued by the Registry of Deeds for the Mandaue City. The aforesaid property is situated at Brgy. Canduman, Mandaue City with an area of Seven Hundred Seventy Seven square meters (777 sq.m.), more or less. Gothong Road Homeowners Association, Inc. (TIN: 238-189-759-000), on the other hand, is a homeowner's organization registered with the Housing and Land Use Regulatory Board (HLURB). On February 7, 2013, the parties executed a Deed of Absolute Sale whereby the owner transfers and conveys the subject property to Gothong Road Homeowners Association, Inc. at an agreed price of One Million Four Hundred Thirty Seven Thousand Four Hundred Fifty Pesos (P1,437,450.00). Pursuant to the certification dated July 2, 2012 issued by SHFC, the property covered by TCT No. MR-4207 T(63866) is actually a Community Mortgage Program (CMP) Project and shall be proportionately distributed to the association's twenty (20) qualified member-beneficiaries. 1 For this purpose, Gothong Road Homeowners Association, Inc. secured a housing loan under the CMP, a financing assistance program of the SHFC a subsidiary of the National Home Mortgage Finance Corporation (NHMFC). In reply, please be informed that pursuant to Section 32 of RA No. 7279, pertinent portions of which state that: CSEHcT "Sec. 32. Incentives. To encourage its wider implementation, participants in the CMP shall be granted with the following privileges or incentives: xxx xxx xxx (b) Properties sold under the CMP shall be exempted from the capital gains tax; and" the landowners who sold their properties for use in a socialized housing project are exempt from the payment of capital gains tax. Such being the case, the sale by the landowner to Gothong Road Homeowners Association, Inc. of the subject property covered by TCT No. MR-4207 T(63866) is exempt from the capital gains tax. Upon issuance of this letter of exemption, and upon registration of the document of sale, a lien on the Certificates of Title of the land to be issued in the name of the Homeowners Association shall be annotated by the Register of Deeds having jurisdiction over the properties, to the effect that the said properties shall be used for socialized housing pursuant to RA No. 7279. (BIR Ruling No. 109-13 dated March 21, 2013) However, the documentary stamp tax is not one of the taxes covered by the tax exemption clause in Sec. 20 of RA 7279. Accordingly, the landowner is liable to pay the documentary stamp tax on the documents conveying the afore-stated properties imposed under Section 196 of the Tax Code of 1997, based on the consideration contracted to be paid for such realty or its fair market value determined in accordance with Section 6 (E) of the said Code, whichever is higher. (BIR Ruling No. 109-13 dated March 21, 2013) 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 subject property covered by TCT No. MR-4207 T(63866) by the landowner to Gothong Road Homeowners Association, Inc. is exempt from the imposition of VAT. (BIR Ruling No. 304-2013 dated August 6, 2013) It is, however, understood 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 titles 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). The CAR shall only be issued after the submission of the requirements provided under RMO 15-2003. (BIR Ruling No. 109-13 dated March 21, 2013) DACIHc Notwithstanding the foregoing, the Bureau of Internal Revenue shall conduct verification and post-audit that the actual occupants of the property transferred under the CMP are qualified beneficiaries and therefore, the seller is entitled to exemption from capital gains tax or income tax imposed under the Tax Code of 1997. 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 ANNEX Gothong Road Homeowners Association, Inc. Gothong Road, Brgy. Subangdaku, Mandaue City Name of Beneficiary Blk. Lot Total Area No. No. (sq.m.) 1 Dalumpines, Lea A. 1 1 35.20 2 Dalumpines, Gerald A. 2 35.20 3 Lucero, Jessie B. 3 35.20 4 Gomalo, Lynwell A. 4 35.20 5 Negapatan, Roy S. 5 36.50 6 Magdasal, Dante A. 6 44.33 7 Carayo, Omar James A. 7 44.33 8 Reambonanza, Rey F. 8 44.33 9 Minoza, Rolando N. 9 39.11 10 Dechosa, Edgardo V. 10 39.11 11 Detuya, John V. 11 39.11 12 Cabrillas, Liezel M. 12 39.11 13 Cabrillas, Roberto T. 13 44.33 14 Arugay, Maria Victoria B. 2 1 44.33 15 Bani, Monica G. 2 44.33 16 Saberon, Emilio B. 3 33.90 17 Ocana, Ernest John Ryan B. 4 44.33 18 Mascarias, Virgilia G. 5 33.90 19 Gomez, Rowena M. 6 32.59 20 Escobio, Dario B. 7 32.59 Footnotes 1. See Annex for the masterlist of qualified beneficiaries.