Lak-K Builders Co.

April 5, 2016 BIR RULING NO. 106-16 RA 7279; BIR Ruling No. 360-2013; BIR Ruling No. 351-2012 Lak-K Builders Co. Units 606 & 609 Jocfer Bldg. Commonwealth Avenue, Quezon City Attention: Michael Angelo F. Kallos Vice President/General Manager Gentlemen : This refers to your letter dated June 15, 2015 requesting, on behalf of LAK-K BUILDERS CO., tax exemption on the low-cost housing project, Pandi Residences 1 (Expansion Area) Resettlement Project , located at Brgy. Mapulang Lupa, Pandi, Bulacan, pursuant to Republic Act (RA) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". Documents submitted show that LAK-K BUILDERS CO., with Tax Identification Number 007-191-150-000, is a General Partnership duly registered with the Securities and Exchange Commission (SEC) bearing SEC Registration No. PG200818704; that it is a real property developer habitually engaged in the business of developing and constructing housing subdivisions; that it acquired eleven (11) parcels of land located at Brgy. Mapulang Lupa, Pandi, Bulacan, covered by Transfer Certificates of Title (TCT) Nos. 040-2014022074, 040-2014022111, 040-2014022138, 040-2014022140, 040-2014022141, 040-2014022142, 040-2014009951, 040-2014010195, 040-2014010197, 040-2014029183 and 040-2014000427 of the Registry of Deeds for Meycauayan, Bulacan, to wit: TCT No. Area (sq.m.) 040-2014010195 168 040-2014010197 2,097 040-2014009951 1 125 040-2014022074 126 040-2014022111 80 040-2014022138 122 040-2014022140 375 040-2014022141 2,087 040-2014022142 2 99 040-2014029183 3 25,173 040-2014000427 4 3,120 Total Area 33,572 ====== On September 19, 2013, a Contract Agreement 5 was entered into by and between LAK-K BUILDERS CO. and Pandi Residences Homeowner's Association, Inc. (PRHOAI) , a homeowner's organization registered with the Housing and Land Use Regulatory Board (HLURB) with Registration No. 20090, whereby LAK-K BUILDERS CO. has agreed to sell to PRHOAI's individual members 6 the developed lots, including the completed housing units thereon under the Community Initiative Approach Program (CIAP) of the National Housing Authority (NHA) (TIN 000-916-384-000) for Two Hundred Forty Thousand Pesos (P240,000) 7 for every developed lot and completed housing unit per family. On October 14, 2013, a Memorandum of Agreement 8 was executed by and among LAK-K BUILDERS CO., as the landowner/developer/constructor, the members of PRHOAI, as the beneficiaries, and the NHA, as the lead agency in the implementation of the National Resettlement Programs of the government for Fiscal Year (FY) 2013, to ensure the timely, peaceful and orderly relocation and resettlement of the informal settler families living in danger areas, affected by calamities and those affected by the clearing of waterways, esteros and infrastructure projects of the government in Metro Manila. Under the MOAs, members of the PRHOAI shall be provided by the NHA with a financial grant through the CIAP under the National Resettlement Program of the government for FY 2013 in the amount not to exceed One Hundred Fifteen Thousand Pesos (P115,000.00) per lot per family and One Hundred Twenty Five Thousand Pesos (P125,000.00) per housing unit, respectively. SDAaTC On June 15, 2015, LAK-K BUILDERS CO. and the NHA executed a Deed of Absolute Sale (DOAS) whereby the former transferred and conveyed to the latter Two Hundred Twenty (222) n developed lots under Batch 1-2015 with a total aggregate saleable area of Nine Thousand Six Hundred Ninety Seven (9,697) square meters, more or less, situated in Pandi Residences 1 Resettlement Project in Brgy. Mapulang Lupa, Pandi, Bulacan, identified and more particularly described as portion of TCT Nos. 040-2014022074, 040-2014022111, 040-2014022138, 040-2014022140, 040-2014022141, 040-2014022142, 040-2014009951, 040-2014010195, 040-2014010197, 040-2014029183 and 040-2014000427, for and in consideration of Twenty Five Million Five Hundred Thirty Thousand Pesos (P25,530,000.00). In reply, please be informed that pursuant to Sections 19 and 20 of Republic Act (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;" the landowner/developer of properties who sells its properties for use in a socialized housing project is exempt from the payment of the capital gains tax and project-related income taxes. Such being the case, the sale transactions by LAK-K BUILDERS CO. to NHA of the 222 developed lots under Batch 1-2015 on the 9,697 sq.m. portion of lots covered by TCT Nos. 040-2014022074, 040-2014022111, 040-2014022138, 040-2014022140, 040-2014022141, 040-2014022142, 040-2014009951, 040-2014010195, 040-2014010197, 040-2014029183 and 040-2014000427, are exempt from capital gains tax, project-related income taxes and consequently from withholding tax. (BIR Ruling No. 360-2013 dated September 30, 2013) Moreover, pertinent portions of Revenue Memorandum Circular (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 It must be noted that the exemption from the documentary stamp tax of NHA, in connection with any of its socialized housing projects, 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 sale transactions by LAK-K BUILDERS CO. to NHA of the 222 developed lots under Batch 1-2015 on the 9,697 sq.m. portion of lots covered by TCT Nos. 040-2014022074, 040-2014022111, 040-2014022138, 040-2014022140, 040-2014022141, 040-2014022142, 040-2014009951, 040-2014010195, 040-2014010197, 040-2014029183 and 040-2014000427, are likewise, exempt from the payment of documentary stamp tax under Section 196 of the Tax Code of 1997, as amended. (BIR Ruling No. 360-2013 dated September 30, 2013) . Pursuant to Section 20 (d) (3) of RA 7279, the sale of a socialized housing as defined therein shall also be exempt from the payment of value-added tax (VAT). Relative thereto, Section 4.109-1 (B) (1) (p) (3) of RR No. 16-2005 states that: "Section 4.109-1. VAT-Exempt Transactions. (A) In general. "VAT-exempt transactions" refer to the sale of goods or properties and/or services and the use or lease of properties that is not subject to VAT (output tax) and the seller is not allowed any tax credit of VAT (input tax) on purchases. acEHCD xxx xxx xxx (B) Exempt transactions. (1) Subject to the provisions of Subsection (2) hereof, the following transactions shall be exempt from VAT: xxx xxx xxx (p) The following sales of real properties are exempt from VAT, namely: xxx xxx xxx (3) Sale of real properties utilized for socialized housing as defined under RA No. 7279 , and other related laws, such as RA No. 7835 and RA No. 8763, wherein the price ceiling per unit is P225,000.00 or as may from time to time be determined by the HUDCC and the NEDA and other related laws. . . . ." Furthermore, pursuant to HUDCC Resolution No. 1, Series of 2013, promulgated on October 16, 2013 approving the adjustment of price ceiling for socialized housing, and as circularized by Revenue Memorandum Circular No. 35-2014, pertinent portion of which reads: "THEREFORE BE IT RESOLVED, AS IT IS HEREBY RESOLVED that the price ceiling for horizontal socialized housing be adjusted from P400,000.00 to P450,000.00." thus, beginning December 18, 2013, 9 the newly adjusted price ceiling of P450,000.00 for horizontal socialized housing shall apply to sale of real properties utilized for socialized housing, as defined under R.A. No. 7279 otherwise known as "Urban Development and Housing Act", and other related laws such as R.A. No. 7835 otherwise known as the "Comprehensive and Integrated Shelter Financing Act of 1994," and R.A. No. 8763, otherwise known as the "Home Guaranty Act of 2000". Moreover, Section 2 of R.R. No. 17-2001 provides: "Section 2. Definition of Terms. As used in these Regulations, the following terms shall have the following meaning: xxx xxx xxx "A socialized housing unit shall not exceed P150,000.00 (now P450,000.00 per HUDCC Resolution No. 1, Series of 2013, promulgated on October 16, 2013) for a house and lot package, subject to periodic adjustment or increase as the Housing and Land Use Regulatory Board (HLURB) may effect from time to time. In the case of sale of homelots only, the price shall not exceed forty percent (40%) of the maximum limit prescribed for the house and lot package." Thus, the sale by LAK-K BUILDERS CO. to NHA of home lots valued at One Hundred Eighty Thousand Pesos (P180,000.00) and below, and house and lot packages valued at Four Hundred Fifty Thousand Pesos (P450,000.00) and below on its Pandi Residences 1 (Expansion Area) Resettlement Project, Brgy. Mapulang Lupa, Pandi, Bulacan , 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 LAK-K BUILDERS CO. must issue non-VAT official receipts on its gross receipts from the said socialized housing project. (BIR Ruling No. 351-12 dated May 21, 2012) Upon application for exemption, a lien on the title of the subject parcel of 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 a 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 the transfer of the 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) after the submission of the requirement provided under RMO 15-2003. 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 ATTACHMENT LOCATION: PANDI RESIDENCES 1 BGY. MAPULANG LUPA, PANDI, BULACAN DEVELOPER: LAK-K BUILDERS CO. 222 DEVELOPED LOTS Name of Beneficiaries No. Last Name First Name Middle Name 1 Barias Edna Oliveros 2 Mendoza-Clava Rizza Manalastas 3 Baados Mark Angelo Luciano 4 Baados Vicente Casabuena 5 Austero Narciso Mones 6 Austero Maricel Ceballos 7 Buhay-Molino Precil Ibanez 8 Dela Cruz Percival Duyag 9 Ambol Rommel Mojica 10 Delos Santos Zaldy Daoatin 11 Cagado Cecilia Cabactulan 12 Quinaud Joel Cogay 13 Pianiar Romeo Jr. Marcaida 14 Pangan Rolando Hisola 15 Silvio Edwin Gaviola 16 Duhaylungsod-Sabino Lucy Mendez 17 Orillaneda Edmundo Nazareno 18 Capellan Ellen Bolante 19 Alba Gerald Tamboboy 20 Tiburcio Agusto Jr. Villanueva 21 Villanueva-Lacambra Angelita Caoile 22 Tiburcio Arthur Jr. Putal 23 Gonzaga Arvic Eugenio 24 Pelostratos Cesar Taripe 25 Gabane Roger Dacuma 26 Moralde-Ramos Chique Rose Malalad 27 Garay Romel Badino 28 Jomadiao Lemuel Terora 29 Boyonas Angelo Vallente 30 Francisco-Malonda Jesusa Sorillano 31 Oviedo John Dulnuan 32 Danuco Snookey Villanueva 33 Puno Jesusito Jr. Casamero 34 Aguimlod Mercado Ombaugan 35 Estigoy Federico Jr. Padilla 36 Halipot Gilbert Ramos 37 Halipot Enrico Villareal 38 Candelario Nicanor III Baltazar 39 Sarmiento Quenne Rose Sabino 40 Alarcon Henry Romero 41 Demain Ambrocio Jr. Astonga 42 Torres Mark Ace Baliuag 43 Lucas Rommel Alvarez 44 Merle Rovic Juan 45 Escarcha Genaro Estrellado 46 Lagarto Igmedio Jr. Ramilo 47 Esmeralda Ronnie Asperga 48 Escobio Eduardo Rebuse 49 Dela Cruz Carlito Ebol 50 Semera Victor Secreto 51 Lindayao Danilo Ricafort 52 Quisora Lorena Sacbatona 53 Secreto-Castor Ernestina Flores 54 Mendez Lina Padayao 55 Cabiluna Ernesto Jr. Sumili 56 Tan Carlitos Ofredo 57 Salbana Bernaldo Arroyo 58 Arinola Ariel Jamisola 59 Roble Rie Denampo 60 Tan Oliver Ofredo 61 Rabang Marcial Pablico 62 Tan Gregorio III Ofredo 63 Aquino Marissa Angulo 64 Gumban Lovegelio Jr. Villaflor 65 Aquino Liberato Cristy 66 Sunga Raymond Marquez 67 Cristy Luis Tolentino 68 Couas Roderick Hilig 69 Santos Dario De Guzman 70 Enaje-Ponce Jocelyn Rascano 71 Pine Rozil Simon Santos 72 Canapi Roma Cruz 73 Cayanan Cristina Taruc 74 Simballa Bizz Mijares 75 De Guzman Isidoro III Lising 76 Simballa Reid Mijares 77 Aquino Alberto Esguerra 78 Camiling-Escolano Rachel Alfaro 79 Asis Maria Lourdes Gevero 80 Sibonga Charlie Gonzaga 81 Fuentebella Wilfredo Grope 82 Budao Alexander Abella 83 Jamolin Gregorio Valencia 84 Cario Fe Mariano 85 Lara Edgar Pecaso 86 Doceyo Mayra Cabrela 87 Ruan Ann Raquel Martin 88 Reyes Rodolfo Tamayo 89 Adesas Jonel Floranda 90 Bautista John Ernest Delos Santos 91 Villanueva Alan Apodaca 92 Langub Joselyn Maldo 93 Ignalig Jimmy Siahay 94 Camulte Michael Andana 95 Sabrido Fidel Jr. Gumahin 96 Bebas Loren Obena 97 Sabrido-Bongalos Melissa Teja 98 Moro Dominador (NMN) 99 Elorde Larry Pagkalinawan 100 Tabor Joe Francis Pasag 101 Adesas Julius Floranda 102 Oliva-Capillo Arlene Consuelo 103 Malibiran Joel Monares 104 Oliva Efren Jr. Consuelo 105 Sabrido Eliseo Orbita 106 Advincula Domingo Calderon 107 Odtojan Jerlyn Cayubit 108 Osorio Joseph Getalaga 109 Odtohan Renil Cayubit 110 Ducado Joel (NMN) 111 Abadia Dandy Manreza 112 Villanueva Froilan Gaylon 113 Lizada Alan Lora 114 Baltazar-Embiado Gloria Malang 115 Estoque Jerry Tamayo 116 Ventura Ricky Dugeno 117 Villanueva Florentino Gaylon 118 Lizada-Carrera Susan Cabacoy 119 Antipolo Maria Brillantes 120 Condat Raymond Gacer 121 Feleciano Bernaditte Cagalitan 122 Sarmiento Lazaro De Villa 123 Quilantang Jerome Laurente 124 Perances-Fuentes Aileen Pedroso 125 Feliciano Brenda Cagalitan 126 Casaljay Alma Diaz 127 Idolor Jophil Vila 128 Aguilar Alberto Cardinal 129 Payao Rodrigo Ebalo 130 Pacaor Vernie Bastasa 131 Ta-a Ferdinand Batino 132 Salvino Joel Retazo 133 Lizada Marco Sta. Ana 134 Tariman Geovani Chavez 135 Lizada Enrique Jr. Halipot 136 Pontillo Renato Lozano 137 Lizada Ezekiel Halipot 138 Aguilar Henry Cardinal 139 Albar Ronald Salcedo 140 Aguilar Ken Harold Deflor 141 Badidoy Elmer Alcido 142 Aguilar Romeo Cardinal 143 Santiago-Tolosa Virginia Pamilara 144 Orge Arnel Loon 145 Rizada Ricky Nelson Borleo 146 Acosta Aries Rainiel Tiongson 147 Casabuena Nestor Estrella 148 Ibag Jayvee Lawrence Buguison 149 Mendoza Edwin Eusebio 150 Anto-Vargas Chriselda Dungca 151 Ortaliz-Borja Honey Love Lucero 152 Dungca Marcelino III Amto 153 Ortaliz-Salaysay Honey Joy Lucero 154 Amto Corazon Alsagon 155 Ortaliz-Legaspi Honey Lyn Lucero 156 Alarcon Chastine Marc Dimal 157 Empon Jonathan Beltran 158 Taborite Jason Maraya 159 Roble Wilfredo Dinampo 160 Uchi William Ibardaloza 161 Ramis Rogelio Jr. Torres 162 Leonor Rob Llano 163 Hitosis-Reyes Angelita (NMN) 164 Baronda Delfin Jr. Gagwis 165 Raquiza Saldy Cativo 166 Baronda Ramil Gagwis 167 Reales Kurl Buenvista 168 Taneo Leonora Villanueva 169 Datinguinoo Teodoro Cabales 170 Palma Fernan Mabulac 171 Batikin Policarpio Navarro 172 Castroverde Rodolfo Chavez 173 Manalo Salvador Mondejar 174 Ferrer Narciso Jr. Bugarin 175 Manlangit Jenalyn Areno 176 Doca Arturo Manuel 177 Lava Dennis Maning 178 Magdasoc Alvin Almodal 179 Mangaring-Seachon Joylan Nazarino 180 Dejucos Michael Tolentino 181 Ferro Carla Korina Sarmiento 182 Uchi Epigenio Jr. Ibardolaza 183 Hernandez-Manalo Leonila Arias 184 Uchi Ma. Cleofe Antonio 185 Gawanan-Salas Genalyn Balilo 186 Casile Rane Sacbatona 187 Cahatol-Oserin Jocelyn Divina 188 Casile Vivian Sacbatona 189 Cahatol Jeanjerlie Divina 190 Verso Ricky Lubiano 191 Pearedondo Lovely Liezel Espiritu 192 Jamora Jorge Tibay 193 Blancas Arneldeuz Espiritu 194 Jamora Karyl Gelacio 195 Santillan Jaypee Espiritu 196 Jamora Karl Gelacio 197 Espiritu Mark Eucel Oro 198 Mondano Pio Lingatong 199 Donila Ma. Melba Picanan 200 Mondano-Rasonabe Wilma Navarite 201 Tarrayo Rogelio Bedio 202 Mondano Eugenio Jr. Palomar 203 Mondano Eugenio Sr. Lingatong 204 Del Rosario-Cruz Donavel Dela Cruz 205 Bayal-De Lima Magdalena Canoy 206 Buena-Mesina Catalina Cruz 207 Lim Roel Taghap 208 Templo-Comora Glorype Ortega 209 Rempillo Mark Uno 210 De Lara-Mabanto Katharine Abaloyan 211 Buenconsejo-Uno Teresa Quides 212 Tismo Nicolas Aquino 213 Garcia-Samalio Melissa Corpoz 214 Secreto-Madamecila Milagros Mondia 215 Samalio Ligaya Agregado 216 Quimuel Marlo Branzuela 217 Samalio-Moral Ilma Agregado 218 Esteller Leonida De Los Santos 219 Gardose-Andaya Marivic Glendro 220 Jismundo Eduardo Corpuz 221 Rodriquez-Boquiren Michelle Tambalque 222 Busalpa Danilo Bote Footnotes 1. TCT Nos. 040-2014010195, 040-2014010197 and 040-2014009951 are formerly TCT Nos. 2014003784, 2014003814, 2014003831, 2014003842, 2014003843, 2014003844, 2014003859 (which in turn are transfers from TCT Nos. 2013033904, 2013033905 and 2013033906), 2014003877, 2014003900 and 2014004857 (formerly, TCT No. T-946[M]). The TCT Nos. 2013033904, 2013033905 and 2013033906, on the other hand, are transfers from TCT Nos. T-349269(M), T-357714(M) and RT-30270 mentioned in the Memorandum of Agreement dated October 14, 2013 among LAK-K Builders Company, Pandi Residences Homeowners Association, Inc. and the National Housing Authority. 2. TCT Nos. 040-2014022074, 040-2014022111, 040-2014022138, 040-2014022140, 040-2014022141 and 040-2014022142 are all transfers from TCT No. 2014013553 which, in turn, was a transfer from TCT No. RT2010003393 mentioned in the same Memorandum of Agreement dated October 14, 2013. 3. Formerly TCT No. T-30987. 4. Formerly TCT No. 2013032640 which, in turn, was a transfer from TCT No. T-273606(M) mentioned in the same Memorandum of Agreement dated October 14, 2013. 5. (Financing the Acquisition of Developed Lots and Completed Housing Units) in Pandi Residences, Mapulang Lupa, Pandi, Bulacan. 6. See attached Master List of Beneficiaries consisting of five (5) pages containing Two Hundred Twenty Two (222) beneficiaries. 7. P115,000.00 per developed lot and P125,000.00 per completed housing unit. 8. (For Financing the Acquisition of Developed Lots and Financing the Acquisition of Completed Housing Units) Pandi Residences Resettlement. 9. HUDCC Resolution No. 1 Series of 2013 took effect on December 18, 2013 after having satisfied the publication requirement as circularized by HUDCC Memorandum Circular No. 01 Series of 2014. n Note from the Publisher: Copied verbatim from the official copy. Discrepancy between words and figures.