BIR Ruling No. 125-15

April 17, 2015 BIR RULING NO. 125-15 RA 7279; BIR Ruling No. 500-2014 C.S. Garcia Construction 23 Pelayo St., BF Homes, Quezon City Attention: Engr. Crisanto S. Garcia President Gentlemen : This refers to the letter of Atty. Sinforoso R. Pagunsan, Chief of Staff of the Office of the General Manager of National Housing Authority (NHA) dated January 17, 2014 requesting issuance of Certificate of Tax Exemption for the acquisition of developed lots and completed housing units in Brgys. Andap and San Roque, New Bataan, Compostela Valley pursuant to Republic Act (R.A.) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". Documents submitted show that C.S. Garcia Construction (TIN: 102-241-655-000), is the registered owner of eight (8) parcels of land located at Brgys. Andap and San Roque, New Bataan, Compostela Valley and covered by the following Transfer Certificates of Title (TCT), to wit: TCT No. Lot No. Area (sq.m.) 142-2014010156 1 187 32,436 2 142-2014000871 3 4683-A 20,000 4 142-2014000852 5 1602-A 13,744 142-2014000872 6 6770-A 50,418 142-2014000868 7 6774 93,385 142-2014000870 8 6724 83,030 142-2014000869 9 4626-B 13,672 10 142-2014004764 11 6770-B-6 17,299 Total Area 323,984 ======= all issued by the Registry of Deeds for Province of Davao del Norte. TCT No. 142-2014010156 On June 27, 2014, a Contract Agreement was executed by and between C.S. Garcia Construction and Andap Resettlement Site Homeowners' Association, Inc. (ARSHOAI), a homeowner's organization registered with the Housing and Land Use Regulatory Board (HLURB), whereby C.S. Garcia Construction offered its services to the families who are members of ARSHOAI by delivering developed homelots and completed housing units under the TS Pablo Rehabilitation Plan (PRP). CTAIDE The purchased developed lots and completed housing units shall be financed through the Community Initiative Approach Program (CIAP) of the NHA for Two Hundred Twenty Thousand Pesos (P220,000.00) for every developed lot and completed housing unit per family. Moreover, on October 17, 2014, a Memorandum of Agreement 12 (MOA) was executed by and among, C.S. Garcia Construction, as the landowner/developer, ARSHOAI, as the beneficiary, and the NHA, as sole national government agency engaged in direct housing production mandated to meet the housing needs of the low and marginal income families and to focus its efforts towards the housing needs of the lowest 30% of the urban population. Under the MOA, members 13 of ARSHOAI shall be provided by the NHA with a financial grant under the TSPRP through the CIAP for the acquisition of developed lots with completed housing units in the amount of Two Hundred Twenty Thousand Pesos (P220,000.00) per house and lot package of 60.00 square meter lot area and a house floor area of 22.00 square meter Duplex-type model. On January 14, 2015, C.S. Garcia Construction and the NHA executed a Deed of Absolute Sale whereby the former, transferred and conveyed Three Hundred Fifteen (315) developed lots with an aggregate area of Nineteen Thousand Two Hundred Twenty Eight square meters (19,228 sq.m.) to NHA at an agreed price of Thirty Four Million Six Hundred Fifty Thousand Pesos (P34,650,000.00). TCT Nos. 142-2014000871, 142-2014000852, 142-2014000872, 142-2014000868, 142-2014000870, 142-2014000869 and 142-2014004764 On December 16, 2013, a Contract Agreement was executed by and between C.S. Garcia Construction and New Bataan Homeowners' Association, Inc. (NBHOAI), a homeowner's organization registered with the Housing and Land Use Regulatory Board (HLURB), whereby C.S. Garcia Construction offered its services to the families who are members of NBHOAI by delivering developed homelots and completed housing units under the TS Pablo Rehabilitation Plan (PRP). The purchased developed lots and completed housing units shall be financed through the Community Initiative Approach Program (CIAP) of the NHA for Two Hundred Twenty Thousand Pesos (P220,000.00) for every developed lot and completed housing unit per family. Moreover, on December 19, 2013, a Memorandum of Agreement 14 (MOA) was executed by and among, C.S. Garcia Construction, as the landowner/developer, NBHOAI, as the beneficiaries, and the NHA, as sole national government agency engaged in direct housing production mandated to meet the housing needs of the low and marginal income families and to focus its efforts towards the housing needs of the lowest 30% of the urban population. Under the MOA, members 15 of NBHOAI shall be provided by the NHA with a financial grant under the TSPRP through the CIAP for the acquisition of developed lots with completed housing units in the amount of Two Hundred Twenty Thousand Pesos (P220,000.00) per house and lot package of 60.00 square meter lot area and a house floor area of 22.00 square meter Duplex-type model. On January 21, 2014, C.S. Garcia Construction and the NHA executed a Deed of Absolute Sale whereby the former, transferred and conveyed Two Thousand Six Hundred Seventy Five (2,675) developed lots with an aggregate area of Two Hundred Eighteen Thousand Ninety Three square meters (218,093 sq.m.) to NHA at an agreed price of Two Hundred Ninety Four Million Two Hundred Fifty Thousand Pesos (P294,250,000.00). In reply, please be informed that pursuant to Sections 19 and 20 of Republic Act (RA) No. 7279, pertinent portions of which state that: HAEIac "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; (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 of 2,990 16 house and lot packages on the Two Hundred Thirty Seven Thousand Three Hundred Twenty One square meters (237,321 sq.m.) portion of the subject properties by C.S. Garcia Construction to NHA is exempt from capital gains tax, project-related income taxes and consequently from withholding tax. (BIR Ruling No. 500-2014 dated December 29, 2014) Moreover, pertinent portions of 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 The exemption from documentary stamp tax of NHA in connection with any of its socialized housing project 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 transfer of C.S. Garcia Construction to NHA of the 2,990 house and lot packages on the Two Hundred Thirty Seven Thousand Three Hundred Twenty One square meters (237,321 sq.m.) portion of the subject properties are likewise exempt from documentary stamp tax imposed under Section 196 of the Tax Code of 1997, as amended. (BIR Ruling No. 500-2014 dated December 29, 2014) aEHTSc Upon application for exemption, a lien on the title of the 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 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 transfer of the land 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 requirements provided under RMO 15-2003. Moreover, pursuant to Section 20 (d) (3) of RA 7279, the sale of 2,990 house and lot packages on the Two Hundred Thirty Seven Thousand Three Hundred Twenty One square meters (237,321 sq.m.) portion of the subject properties shall be exempt from VAT. However, the purchases of goods/articles by C.S. Garcia Construction 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. It shall be understood that C.S. Garcia Construction must issue non-VAT official receipts on its gross receipts from the said socialized housing project. 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 Footnotes 1. Formerly: TCT No. T-33781. 2. Total area is 65,460 sq.m. while 33,024 sq.m. owned by Elegio Tomolin, Sr. 3. Formerly: TCT No. T-131322. 4. Total area is 30,000 sq.m. while 10,000 sq.m. owned by Rogelio Ebrano. 5. Formerly: TCT No. 2011010296. 6. Formerly: TCT No. T-49350. 7. Formerly: OCT No. P-6311. 8. Formerly: OCT No. P-14443. 9. Formerly: OCT No. P-49179. 10. Total area is 34,021 sq.m. while 20,349 sq.m. owned by Cristoto T. Carmelotes. 11. Formerly: OCT No. C-13246. 12. For Development of the New Bataan Resettlement Project 2, Brgy. Andap, New Bataan, Compostela Valley. 13. Composed of families heavily affected by Tropical Storm Pablo. 14. For Development of the New Bataan Resettlement Project, Brgy. San Roque, New Bataan, Compostela Valley. 15. Composed of families heavily affected by Tropical Storm Pablo. 16. 315 units in 19,228 sq.m. for TCT No. 142-2014010156 and 2,675 units in 218,093 sq.m. for TCT Nos. 142-2014000871, 142-2014000852, 142-2014000872, 142-2014000868, 142-2014000870, 142-2014000869 and 142-2014004764.