BIR Ruling No. 111-15

April 16, 2015 BIR RULING NO. 111-15 RA No. 7279; BIR Ruling No. 314-14; BIR Ruling No. 284-14 P.A. Alvarez Properties and Development Corporation Unit 2 Ambayec Commercial Bldg., 1250 Nat'l. Hi-way, Nueva, San Pedro City, Laguna 4023 Attention: Mr. Peter Jude T. Alvarez Vice President for Operations Gentlemen : This refers to your letter dated September 22, 2014, requesting Certificate of Tax Exemption on the sale of socialized housing units for the St. Joseph Homes Calamba Project in Barangays Burol and Laguerta, Calamba City, Laguna, pursuant to Republic Act (R.A.) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992''. Documents submitted show that P.A. ALVAREZ PROPERTIES AND DEVELOPMENT CORPORATION, with Taxpayer's Identification No. 003-941-517-000, is a corporation duly organized and existing under Philippine laws; that it is registered with the Securities and Exchange Commission (SEC) under Registration No. ASO94-007701; that it is the owner of five (5) parcels of land and developer of a housing project known as "St. Joseph Homes Calamba" located at Barangays Burol and Laguerta, Calamba City, Laguna, which shall be used for its socialized housing project, the pertinent details of which are as follows, to wit: TCT No. Area (Sq.m.) 060-2014005456 27,912 060-2014007080 5,000 060-2014005472 31,268 060-2014007081 15,000 060-2014005457 11,151 Total 90,331 ====== that the project is duly registered with the Housing and Land Use Regulatory Board (HLURB) under Certificate of Registration No. 25575, with License to Sell No. 28806 both issued by the HLURB Southern Tagalog Region, Dencris Business Center, Brgy. Halang, Calamba City dated November 25, 2013, for 847 lots & units for socialized housing, to wit: St. Joseph Homes Calamba HLURB Certificate of Registration No. 25575 License to Sell No. 28806 (847 lots/units) Block 1 Lots 2, 3, 4, 5, 6, 7, 8, 11, 12, 13, 14, 17, 18, 19, 20, 23, 24, 25, 26, 29, 30, 31, 32, 35, 36, 37, 38, 41, 42, 43, 44; Block 2 Lots 2, 3, 6, 7, 8, 9, 12, 13, 14, 15, 18, 19, 20, 21, 22, 25, 26, 27, 28, 31, 32, 33, 34, 37, 38, 41, 42, 43, 44, 47, 48, 49, 50, 53, 54, 55, 56, 57, 60, 61, 62, 63, 66, 67, 68, 69; Block 5 Lots 2, 3, 6, 7, 8, 9, 12, 13, 14, 17, 18, 19, 20, 23, 24, 25, 26, 29, 30, 31; TESICD Block 6 Lots 2, 3, 4, 5, 8, 9, 10, 11, 14, 15, 16, 17, 18; Block 7 Lots 2, 3, 4, 5, 6, 7, 8, 11, 12, 13, 14, 17, 18, 19, 20, 23, 24, 25, 26, 29, 30, 31, 32, 35, 36, 37, 38, 39, 40, 43, 44, 45, 46, 47, 50, 51, 52, 53, 54, 57, 58, 59, 60, 61, 64, 65, 66, 67; Block 8 Lots 2, 3, 4, 5, 6, 7, 10, 11, 12, 13, 16, 17, 18, 19, 22, 23, 24, 25, 28, 29, 30, 31, 32, 35, 36, 37, 38, 39, 40, 41, 44, 45, 46, 47, 50, 51, 52, 53, 56, 57, 58, 59, 62, 63, 64, 65, 66, 67; Block 10 Lots 2, 3, 4, 5, 8, 9, 10, 11; Block 11 Lots 2, 3, 4, 5, 8, 9, 10, 11; Block 12 Lots 2, 3, 6, 7, 8, 9, 12, 13, 14, 15, 18, 19, 20, 21, 24, 25, 26, 27, 28, 31, 32, 33, 34, 37, 38, 39, 40, 43, 44, 45; Block 13 Lots 2, 3, 4, 5, 8, 9, 10, 11, 14, 15, 16, 17, 20, 21, 22, 23, 24, 27, 28, 29, 30, 33, 34, 35, 36, 39, 40, 41, 42, 45, 46, 47, 48, 49, 50; Block 14 Lots 2, 3, 4, 7, 8, 9, 10, 13, 14, 15, 16, 19, 20, 21, 22, 25, 26, 29, 30, 31, 32, 35, 36, 37, 38, 41, 42, 43; Block 15 2, 3, 4, 5, 8, 9, 10, 11, 14, 15, 16, 19, 20, 21, 22, 23, 24, 27, 28, 29, 30, 33, 34, 35, 36; Block 16 2, 3, 4, 5, 6, 7, 8, 11, 12, 13, 14, 17, 18, 19, 20, 23, 24, 25, 26, 29, 30, 31, 32, 35, 36, 37, 38, 41, 42, 43, 44, 47, 48, 49, 50, 53, 54, 57, 58, 59, 60, 63, 64, 65, 66, 69, 70, 71, 72, 75, 76, 77, 78, 81, 82, 83, 84, 87, 88, 89, 90, 93, 94, 95, 96, 99, 100, 101, 102, 105, 106, 107, 108, 111, 112, 113, 114, 117, 118, 121, 122, 123, 124, 127, 128, 129, 130, 133, 134, 135, 136, 139, 140, 141, 142; Block 17 2, 3, 4, 5, 6, 7, 10, 11, 12, 13, 16, 17, 18, 19, 22, 23, 24, 25, 26, 27, 30, 31, 32, 33, 34, 35, 38, 39, 40, 41, 44, 45, 46, 47, 50, 51, 52, 53, 54, 55; Block 18 2, 3, 4, 5, 6, 7, 10, 11, 12, 13, 16, 17, 18, 19, 22, 23, 24, 25, 26, 27, 30, 31, 32, 33, 34, 35, 38, 39, 40, 41, 44, 45, 46, 47, 50, 51, 52, 53, 54, 55, 56; Block 19 2, 3, 4, 5, 6, 7, 10, 11, 12, 13, 16, 17, 18, 19, 22, 23, 24, 25, 26, 27, 28, 31, 32, 33, 34, 35, 38, 39, 40, 41, 44, 45, 46, 47, 50, 51, 52, 53, 54, 55; Block 20 2, 3, 4, 5, 6, 7, 10, 11, 12, 13, 16, 17, 18, 19, 22, 23, 24, 25, 28, 29, 30, 31, 32, 35, 36, 37, 38, 41, 42, 43, 44, 47, 48, 49, 50; Block 21 2, 3, 4, 5, 8, 9, 10, 11, 14, 15, 16, 17, 20, 21, 22, 23, 24, 25, 26, 29, 30, 31, 32, 35, 36, 37, 38, 41, 42, 43, 44, 47, 48, 49, 50, 51, 52; Block 22 2, 3, 4, 5, 8, 9, 10, 11, 14, 15, 16, 17, 20, 21, 22, 23, 26, 27, 28, 29, 32, 33, 34, 35, 38, 39, 40, 41, 44, 45, 46, 47, 48; Block 23 Lots 2, 3, 4, 5, 8, 9, 10, 13, 14, 15, 16, 17, 18, 19, 22, 23, 24; Block 24 Lots 2, 3, 4, 5, 6, 7, 8, 9, 12, 13, 14, 15, 18, 19, 20, 21, 22, 23, 24, 25, 28, 29, 30, 31; Block 25 Lots 2, 3, 6, 7, 8, 9, 10, 13, 14, 15, 16, 19, 20, 21, 24, 25, 26, 27, 28, 31, 32, 33, 34; Block 26 Lots 2, 3, 4, 5, 6, 9, 10, 11, 12, 13, 16, 17, 18, 19, 22, 23, 24, 25, 28, 29, 30, 31, 32, 35, 36, 37, 38; Block 27 Lots 2, 3, 4, 5, 6, 7, 10, 11, 12, 13, 14, 17, 18, 19, 20, 23, 24, 25, 26, 27, 28, 29, 32, 33, 34, 35, 36, 39, 40, 41, 42; Block 28 Lots 2, 3, 6, 7, 8, 9, 12, 13, 14, 15, 16, 19, 20, 21, 22, 25, 26, 29, 30, 31, 32, 35, 36, 37, 38, 39, 42, 43, 44, 45; Block 29 Lots 2, 3, 4, 5, 8, 9, 10, 11, 14, 15, 16, 17, 18, 21, 22, 23, 24, 27, 28, 29, 30, 33, 34, 35, 36, 39, 40, 41, 42, 43, 46, 47, 48, 49. and that the project is categorized as a socialized housing project as certified by the Regional Officer, Housing and Land Use Regulatory Board (HLURB), Southern Tagalog Region. In support of its request, P.A. ALVAREZ PROPERTIES AND DEVELOPMENT CORPORATION submitted the following required documents: 1) Certified true copy of the Certificate of Registration with the BIR; 2) Certified true copies of the Certificate of Incorporation, Articles of Incorporation and By-Laws with the Securities and Exchange Commission (SEC); 3) Certified true copies of the Transfer Certificates of Title issued by the Register of Deeds, Calamba, Laguna; 4) Certified true copies of Tax Declarations of Real Properties issued by the Office of the City Assessor, City of Calamba, Laguna; 5) Original copy of the Certification dated September 10, 2014, issued by the Regional Officer, Housing and Land Use Regulatory Board (HLURB), Southern Tagalog Region, certifying that P.A. ALVAREZ PROPERTIES AND DEVELOPMENT CORPORATION is engage in developing socialized residential subdivision by virtue of its project, ST. JOSEPH HOMES CALAMBA located at Brgys. Burol and Laguerta, Calamba City, Laguna and covered by License to Sell No. 28806 issued on November 25, 2013; 6) Certified true copy of the Certificate of Registration No. 25575 of ST. JOSEPH HOMES CALAMBA issued by the HLURB; 7) Certified true copy of the License to Sell No. 28806 for ST. JOSEPH HOMES CALAMBA issued by the HLURB; 8) Original copy of the Certification dated July 14, 2014, issued by the Regional Officer, Housing and Land Use Regulatory Board (HLURB), Southern Tagalog Region, certifying that the project, ST. JOSEPH HOMES CALAMBA is categorized as Socialized Housing Project under Batas Pambansa Bilang 220 with a maximum price of P450,000.00 per house and lot; 9) Certified true copy of the Preliminary Approval & Locational Clearance issued by the City Mayor, City of Calamba, Laguna; 10) Certified true copy of the Development Permit issued by the City Mayor, City of Calamba, Laguna. In reply, please be informed that Section 20 of RA No. 7279, reads: "Sec. 20. Incentives for the 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." xxx xxx xxx Only the sale of socialized housing units to qualified beneficiaries shall be exempt from Income Taxes, and consequently, from Creditable Expanded Withholding Tax prescribed under Revenue Regulations (R.R.) No. 2-98, as amended. Thus, a buyer of a socialized housing unit shall be required by the developer/owner/seller to execute a sworn statement that he is eligible as a socialized housing beneficiary provided under Section 5 (A) of R.R. No. 11-97. Section 5 (A) of R.R. No. 11-97 provides that: aTADcH SEC. 5. Requirements/Conditions for the Availment of Tax Incentives/Exemptions . A. To qualify for socialized housing program, a beneficiary (a) must be a Filipino citizen; (b) must be an underprivileged and homeless citizen, as defined in Section 3(t) of the Act and Section 2(r) of these Regulations; (c) must not own any real property, whether in the urban or rural areas; and (d) must not be a professional squatter or a member of squatting syndicates. In this connection, any sale made by the owner and developer to interested parties other than the principal target beneficiaries under Sections 3 (t) and 16 of RA No. 7279, shall not be entitled to the foregoing tax exemption should there be non-compliance with any of the aforestated sine qua non terms and conditions. (BIR Ruling No. 314-14 dated August 11, 2014) It is, however, understood that the Certificate Authorizing Registration (CAR) shall only be issued after it is established upon proper verification by the Revenue District Officer (RDO) concerned that, considering the rules on valuation of real property, the actual selling price per sale transaction of the house and lot packages in this case does not really exceed P450,000.00 and P180,000.00 for lot only. Thus, sale of a house and lot or lot only above the maximum amount shall be subject to the corresponding internal revenue taxes. Nonetheless, it is observed that Documentary Stamp Tax is not one of the taxes covered by the tax exemption clause in Section 20 of RA No. 7279. Such being the case, the owner/project developer/seller shall be liable to pay the Documentary Stamp Tax on the documents conveying the properties imposed under Section 196 of the Tax Code of 1997, as amended, based on the consideration contracted to be paid for such realties or on their fair market value determined in accordance with Section 6 (E) of the said Code, whichever is higher. Pursuant to Section 20 of RA 7279, a project contractor of a socialized housing project shall also be exempt from the payment of Value-Added Tax (VAT) on the project concerned. 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. 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, dated October 16, 2013 and as circularized by Revenue Memorandum Circular No. 035-14, 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." the newly adjusted price ceiling of P450,000.00 for 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", beginning January 1, 2009. Moreover, Section 2 of Revenue Regulations 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) 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 ." (Emphasis supplied) The developer of the socialized housing units under RA No. 7279 is exempt from the payment of Value-Added Tax pursuant to the aforecited provision. However, purchases of goods/articles by the project contractor shall be subject to Value-Added Tax, even if the said purchases are to be used for the socialized housing project. Moreover, it shall be understood that it must issue non-VAT official receipts on its gross receipts from the said socialized housing project. (BIR Ruling No. 284-14 dated July 9, 2014) Accordingly, sale by P.A. ALVAREZ PROPERTIES AND DEVELOPMENT CORPORATION of the House and Lot/Units in St. Joseph Homes Calamba project covered by HLURB License to Sell No. 28806 (for 847 lots & units-socialized housing) not exceeding the price ceiling of P450,000.00 (house and lot package) and P180,000.00 (homelots only) to qualified beneficiaries should be exempt from Income Taxes and, consequently, from Creditable Expanded Withholding Tax and from VAT pursuant to RA 7279. 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