BIR Ruling No. 090-15

April 8, 2015 BIR RULING NO. 090-15 RA No. 7279; BIR Ruling No. 294-14; BIR Ruling No. 283-14 Bung-ao Homeowners Association, Inc. Poblacion Ilaya, Dumarao, Capiz 5812 Attention: Mr. Eduardo A. Eleccion President Gentlemen : This refers to the letter of Ma. Ana R. Oliveros, President of Social Housing Finance Corporation (SHFC) dated September 8, 2014, endorsing the sale transaction between Noel M. Arancillo, married to Flori Arancillo and Bung-ao 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 Noel M. Arancillo , (TIN 121-188-200-000) married to Flori Arancillo is the registered owner of a parcel of land covered by Transfer Certificate of Title (TCT), to wit: TCT No. Area (sq.m.) Tax Declaration No. 089-2010000188 17,292 0601 issued by the Registry of Deeds for Roxas, Capiz. The aforesaid property is situated at Brgy. Poblacion Ilaya, Dumarao, Capiz. Bung-ao Homeowners Association, Inc. (TIN 406-214-281-000), on the other hand, is a homeowners' organization registered with the Housing and Land Use Regulatory Board (HLURB) under Certificate of Registration No. 11381. On June 20, 2014, the parties executed a Deed of Absolute Sale whereby the owner transferred and conveyed Seven Thousand Six Hundred Fifty Seven square meters & Five decimeters (7,657.05 sq.m.) portion of the subject property to Bung-ao Homeowners Association, Inc. at an amount of Three Hundred Fifty Pesos (Php350.00) per square meter or at a total agreed price of Two Million Six Hundred Seventy Nine Thousand Nine Hundred Sixty Seven Pesos & Ninety Four Centavos (Php2,679,967.94), Philippine Currency. Pursuant to a Certification issued by SHFC, Seven Thousand Six Hundred Fifty Seven square meters & Five decimeters (7,657.05 sq.m.) out of the Seventeen Thousand Two Hundred Ninety Two square meters (17,292 sq.m.) covered by TCT No. 089-2010000188 actually comprise a CMP Project and shall be proportionately distributed to the association's thirty four (34) qualified member-beneficiaries (Annex A). For this purpose, Bung-ao Homeowners Association, Inc. secured a housing loan under the CMP, a financing assistance program of the Social Housing Finance Corporation a subsidiary of the National Home Mortgage Finance Corporation (NHMFC). DEICaA In support of its request, Bung-ao Homeowners Association, Inc. has completely submitted the following documents: 1) Letter application for tax exemption; 2) Certification of the President of the SHFC that the subject property qualifies and is actually a CMP project; 3) Certified true copy of the Deed of Absolute Sale to the Community Association; 4) Certified true copy of the Articles of Incorporation of the Community Association; 5) Certified true copy of the Masterlist of Qualified Beneficiaries duly certified by the SHFC; 6) Certified true copies of the TCT and Latest Tax Declaration of the Property Sold to the Community Association; 7) Certified true copy of the Location Plan of the Lot Sold to the Community Association; 8) TIN ID/BIR Certificate of Registration of the seller and the Homeowner Association; 9) BIR Form 2000-OT (Documentary Stamp Tax Return); and 10) Other pertinent documents. In reply, please be informed that pursuant to Section 32 of RA No. 7279, pertinent portions of which state that: "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 landowner who sold his property for use in a socialized housing project is exempt from the payment of capital gains tax. Such being the case, the sale by the landowner to Bung-ao Homeowners Association, Inc. , in so far as the Seven Thousand Six Hundred Fifty Seven square meters & Five decimeters (7,657.05 sq.m.) portion of the property covered by TCT No. 089-2010000188 is concerned, 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 Certificate 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 property, to the effect that the said property shall be used for socialized housing pursuant to RA No. 7279. (BIR Ruling No. 294-14 dated July 23, 2014) 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 property 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. 283-14 dated July 7, 2014) EAHcCT 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 title 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 Nos. 294-14 dated July 23, 2014 and 283-14 dated July 7, 2014) 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 A Bung-ao Homeowners Association, Inc. Poblacion Ilaya, Dumarao, Capiz Masterlist of Beneficiaries Name of Beneficiary Blk. Lot Total Lot No. No. Area 1. Ozaraga, Ma. Sylvia I. 1 13 163.70 2. Ozaraga, Kathryn Mae F. 1 14 163.70 3. Borres, Milagrosa B. 1 21 163.70 4. Panes, Higiene A. 2 2 196.44 5. Albay, Mense B. 2 4 163.70 6. Bernabe, Jomar A. 2 6 163.70 7. Molina, Peter C. 2 8 163.70 8. Ribot, Ma. Angie H. 2 9 163.70 9. Molino, Epifania C. 2 10 163.70 10. Gonzaga, Myrna B. 3 5 163.70 11. Eleccion, Eduardo A. 3 8 115.24 12. Asopardo, Crisostomo B. 3 9 235.72 13. Develos, Beverly E. 3 10 163.70 14. Febrada, Belinda B. 4 1 230.48 15. Febrada, Jonathan B. 4 2 230.48 16. Dela Cruz, Dantes P. 4 3 196.44 17. Lisbo, Sheryl A. 4 7 196.44 18. Lisbo, Merlinda A. 4 9 196.44 19. Asopardo, Carol E. 4 10 196.44 20. Asopardo, Ruben T. 4 13 364.06 21. Armada, Jocelyn A. 4 14 394.18 22. Abella, Leah N. 5 4 174.17 23. Encarnacion, Genalyn P. 5 5 174.17 24. Parino, Anna Krista P. 5 6 174.17 25. Hachuela, Ricky V. 5 7 323.46 26. Hachuela, Milagros S. 5 8 248.82 27. Malicosio, John C. 5 10 196.44 28. Albay, Patricio V. 5 11 116.55 29. Albay, Janine Marie V. 5 12 120.48 30. Hachuela, Joemar A. 6 1 340.49 31. Atondocan, Gerardo E. 6 3 261.91 32. Barcelona, Rosemarie H. 6 5 392.87 33. Hachuela, Jose Jimmy A. 6 7 306.44 34. Hare, Joseph S. 7 1 637.76 Total: 7,657.05 =======