BIR Ruling No. 110-12

February 22, 2012 BIR RULING NO. 110-12 RA No. 7279; BIR Ruling No. 130-10; BIR Ruling No. 040-10; BIR Ruling No. 344-11 Villa Ilagan Homeowners Association, Inc. Phase II Brgy. Muzon, City of San Jose del Monte, Bulacan Attention: Nessie C. Bugais CA Secretary Gentlemen : This refers to your letter dated July 1, 2011, requesting for a tax exemption on the sale of real property by Atty. Ruben M. Ilagan in favor of Villa Ilagan Homeowners Association, Inc. Phase II pursuant to Republic Act 7279 otherwise known as the "Urban Development and Housing Act of 1992". It appears that Atty. Ruben M. Ilagan with Tax Identification Number 188-508-730-000, is the registered owner of a parcel of land, identified as Lot No. 4-C-3 of the subdivision plan Psd-031420-060757 being a portion of lot 4-c, Psd-03-039171 L.R.C. Record No. covered by Transfer Certificate of Title (TCT) No. T-188942 (M) issued by the Registry of Deeds for the Meycauayan Branch. The aforesaid property is situated at Brgy. Muzon Sitio Panaklayan, San Jose del Monte Bulacan with an area of eight thousand six hundred eighty four square meters (8,684 sq.m.),more or less. Villa Ilagan Homeowners Association, Inc. Phase II with Tax Identification Number 260-205-073-000, on the other hand, is a homeowner's organization registered with the Housing and Land Use Regulatory Board (HLURB).On June 6, 2011, the parties executed a Deed of Sale whereby the owner transfers and conveys seven thousand eighty three square meters (7,083 sq.m.) of the subject property to Villa Ilagan Homeowners Association, Inc. Phase II at an agreed price of Six Million Three Hundred Seventy Four Thousand Seven Hundred Pesos (P6,374,700.00) at Nine Hundred Pesos (P900.00) per sq.m. Pursuant to a certification issued by Social Housing Finance Corporation, seven thousand eighty three square meters (7,083 sq.m.) of the property covered by TCT No. T-188942 (M) is actually a CMP Project and shall be proportionately distributed to the association's qualified member-beneficiaries. For this purpose, Villa Ilagan Homeowners Association, Inc. Phase II secured a housing loan under the Community Mortgage Program (CMP),a financing assistance program of the Social Housing Finance Corporation (SHFC) a subsidiary of the National Home Mortgage Finance Corporation (NHMFC). In reply, please be informed that pursuant to Sections 20 and 32 of RA No. 7279, pertinent portions of which state that: "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: (d) Exemption from the payment of the following: (2) Capital gains tax on raw lands used for the project; xxx xxx xxx. Sec. 32. Incentives. To encourage its wider implementation, participants in the CMP shall be granted with the following privileges or incentives: EIaDHS 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 of the aforestated property by Atty. Ruben M. Ilagan to Villa Ilagan Homeowners Association, Inc. Phase II in so far as the seven thousand eighty three square meters (7,083 sq.m.) portion thereof is concerned is exempt from the capital gains tax. ( BIR Ruling No. 130-10 dated December 1, 2010 ) However, the documentary stamp tax is not one of the taxes covered by the tax exemption clause in Sec. 20 of RA 7279. Accordingly, Atty. Ruben M. Ilagan 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. It is, however, understood that this ruling is never intended and shall not be construed as giving authority to the concerned Register of Deed 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 RMO15-2003. ( BIR Ruling No. 040-10 dated August 27, 2010 ) Moreover, the transfer of the lots from the said association to the individual members (see Annex for the masterlist of qualified beneficiaries) thereof is not subject to either the capital gains tax imposed under Section 27 (D) (5) of the Tax Code of 1997, or the creditable withholding tax imposed under Revenue Regulations No. 2-98, as amended, considering that the said transfer/transaction is merely a formality to finally effect transfer of titles of the real properties to the member-beneficiaries who actually bought the same. Such lack of consideration does not, likewise, render the transfer subject to the donor's tax imposed under Section 99 of the Tax Code of 1997, since there is no intention on the part of the association to donate said properties to the members considering that the members of the association could not donate properties the ownership of which belongs to themselves (member-beneficiaries). AHDacC Furthermore, the deed to be executed by Villa Ilagan Homeowners Association, Inc. Phase II to effect the aforesaid transfer in favor of its individual members is not subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. However, the notarial acknowledgment to said deed of conveyance is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the Tax Code of 1997. 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. (BIR Ruling No. 344-11 dated September 13, 2011) Finally, 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 beneficiary association of the socialized housing program shall be caused to 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. 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 ATTACHMENT VILLA ILAGAN HOMEOWNERS ASSOCIATION, INC. PHASE II BRGY. MUZON SAN JOSE DEL MONTE BULACAN Name of Beneficiary Blk. No. Lot Total Area No. (sq.m.) 1. Angelo Ledda, Jr. 1 1 60.15 2. Emily Labine 1 2 48.12 3. Rodolfo S. Lucion 1 3 56.65 4. Nino D. Castillo 1 4 48.12 5. Michelle F. Lucion 1 5 48.12 6. Limar C. Abiera 1 6 48.12 7. Vicente M. Maniba 1 7 48.12 8. Jocelyn O. Manucan 1 8 48.12 9. Helen Monteclaro 1 9 48.12 10. Ruben Antonio 1 10 48.12 11. Melda Oyales 1 11 48.12 12. Pedro M. Almeria 1 12 48.12 13. Rosalaine O. Dagdagan 1 13 48.12 14. Analyn Servano 1 14 48.12 15. Milagrose L. Giron 1 15 48.12 16. Junielyn F. Bueno 1 16 48.12 17. Karen A. Nones 1 17 48.12 18. Romeo S. Dimalanta 1 18 48.12 19. Matda D. Julian 1 19 48.12 20. Romeo S. delos Reyes 1 20 48.12 21. Renato G. Oyales 1 21 48.12 22. Jonh Paolo delos Reyes 1 22 48.12 23. Maphil M. Gerodias 1 23 48.12 24. Crinel R. Soguilon 1 24 49.63 25. Edlyn M. Gerodias 1 25 51.13 26. Nessie C. Bugais 1 27 58.65 27. Shiela Marie P. dela Cruz 1 28 49.63 28. Rayza Tabayoyong 1 29 49.63 29. Nomeriano N. Lirio, Jr. 1 30 52.63 30. Ronald T. Acdal 2 1 46.62 31. Saturnino Bersamira 2 2 48.12 32. Mark Hermie Annoya 2 3 48.12 33. Rowena R. de Vera 2 4 48.12 34. Reynaldo A. Navidad 2 5 48.12 35. Melba A. Rodriquez 2 6 48.12 36. Primo Simbajon 2 7 48.12 37. Jermin Ray S. Alegro 2 8 48.12 38. Mark Gil Dumduma 2 9 48.12 39. Lorna G. Balatucan 2 10 48.12 40. Mercedita Bajan 2 11 48.12 41. Chalyn M. Arrogancia 2 12 48.12 42. Joseph Gaton 2 13 48.12 43. Wendell P. Labine 2 14 48.12 44. Eugenio B. Dordas 2 15 48.12 45. Donald B. Vinluan 2 16 48.12 46. Rolly B. Gisalan 2 17 48.12 47. Michael Vinluan 2 18 48.12 48. Lea T. Andres 2 19 48.12 49. Macrina A. Dy 2 20 46.62 50. Ma. Rosa Gisalan 2 21 46.62 51. Francisco T. Almonte 2 22 48.12 52. Alfredo Zapanta 2 23 48.12 53. Joel D. Bernido 2 24 48.12 54. Milagros T. Calzado 3 1 46.62 55. Marcial Besmonte 3 2 48.12 56. Teresita Esin 3 3 48.12 57. Wonelyn Calixto 3 4 48.12 58. Romeo Balasa 3 5 48.12 59. Edmer Gegantoca 3 6 48.12 60. Juan Carlos Arcino 3 7 48.12 61. Catherine Gegantoca 3 8 48.12 62. Carmencita L. Arcino 3 9 48.12 63. Reynaldo L. Cruzado 3 10 45.11 64. Elmer Dabucon 3 11 45.11 65. Michael Susano 3 12 45.11 66. Juliet Tibon 3 13 52.63 67. Rhodalyne D. Mila 3 14 58.65 68. Silvestre T. Cabasag 4 1 48.12 69. Victor Villalva 4 2 46.62 70. Joanne Sobrevilla 4 3 55.64 71. Modesta Tibon 4 4 54.12 72. Roberto Perez 4 5 52.63 73. Ephraim Barte 5 1 57.15 74. Ricardo Barte 5 2 48.12 75. Arnulfo S. Domingo, Jr. 5 3 48.12 76. Ma. Theresa Napoto 5 4 48.12 77. Oscar Siwa 5 5 48.12 78. Aldrin Gaces 5 6 60.15 79. Marilyn Anciano 6 1 67.67 80. Jona Marie Anciano 6 2 48.12 81. Leonila Abando 6 3 49.63 82. Mercy Conejos 6 4 49.63 83. Ma. Cecilia Asis 6 5 48.12 84. Ronald A. Sempron 6 6 48.12 85. Elmer T. Dichoson 6 7 48.12 86. Lilibeth T. Legazpi 6 8 48.12 87. Joel C. Lucas 6 9 48.12 88. Amador M. Jeron, Jr. 6 10 48.12 89. Alejandro M. Jeron 6 11 48.12 90. Elizalde Barrio 6 12 49.63 91. Nancy Vargas 6 13 52.63 92. Raquel Y. Martin 7 1 48.12 93. Realyn Denoso 7 2 51.13 94. Jhesa Quintero 7 3 48.12 95. Margarita Manocan 7 4 48.12 96. Annalyn Almonicar 7 5 48.12 97. Aira V. Israel 7 6 48.12 98. Jea A. Montolo 7 7 48.12 99. Antonio P. Israel 7 8 48.12 100. Christian N. Quintero 7 9 48.12 101. Marian A. Hebulan 7 10 48.12 102. Eugene A. Hebulan 7 11 48.12 103. Cristy Aboga 7 12 49.63 104. Jovie A. Hebulan 7 13 48.12 105. Helen J. Llanes 8 1 60.05 106. Percy B. Mapeso 8 2 52.63 107. Rone C. Ogario 8 3 45.11 108. Eduardo E. Ofaga 8 4 55.64 109. Eden C. Almerida 8 5 48.12 110. Bonifacio Mahinay 8 6 55.64 111. Allienza Mia Dugayo 8 7 48.12 112. Mierven Poresores 8 8 55.64 113. Jonalyn B. Senolos 8 9 48.12 114. Loresol M. Antaran 8 10 55.64 115. Jouanalyn B. Senolos 8 11 48.12 116. Roderick Cruz 8 12 55.64 117. Jess Brian E. Gastardo 8 13 48.12 118. Morlito Orsolino 8 14 55.64 119. Jovito M. Armas 8 15 48.12 120. Gerlie Dr. Biro 8 16 55.64 121. Herminio B. Elen, Jr. 8 17 48.12 122. Jesus Lawag 8 18 55.64 123. Rosalinda Lizama 8 19 48.12 124. Arnie Gilbuena 8 20 51.13 125. Maricel B. Allojacin 8 21 49.63 126. Jescel B. Elen 9 1 49.63 127. Rene R. Buenaflor 9 2 46.62 128. Ricar Jhon D. Castillo 9 3 49.63 130. Ma. Linda S. Ronda 9 4 48.12 131. Ruben Quijan 9 5 48.12 131. Cristina C. Lucas 9 6 48.12 132. Esmael A. Suan 9 7 48.12 133. Rowena L. Marfil 9 8 48.12 134. Carlito A. Silva 9 9 48.12 135. Jeremias Oficial 9 10 52.63 136. Jomarie F. Clarino 9 11 48.12 137. Marilyn A. Fariolen 9 12 48.12 138. Maricel A. Ibuna 9 13 48.12 139. Leonila O. Nuevo 9 14 48.12 140. Amie Floron 9 15 48.12 141. Marelo F. Cantonjos 9 16 48.12 142. Michael F. Cantonjos 9 17 48.12 143. Sailas F. Cantonjos 9 18 48.12