BIR Ruling No. 126-11

April 13, 2011 BIR RULING NO. 126-11 RA 7279; BIR Ruling [SH-(053) 383-09] National Housing Authority Bicol Regional Office Mayon Vista Housing Subdivision Barangay Tuburan, Lingao City Attention: Mr. Alberto A. Perfecto Regional Manager Gentlemen : This refers to your letter dated February 16, 2010 requesting on behalf of the landowner, Ms. Rachel Ria A. Roque, for a ruling that the sale of her parcel of land to the National Housing Authority (NHA) for its socialized housing program for the benefit of the homeless and underprivileged residents of Bulan, Sorsogon is exempt from the payment of capital gains tax and documentary stamp tax pursuant to Sections 19 and 20 of Republic Act (RA) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992." CcADHI Documents submitted disclosed that Ms. Rachel Ria A. Roque, with Taxpayer's Identification Number (TIN) 103-211-754, is the absolute and registered owner of a parcel of land situated in Barangay N. Roque, Bulan Sorsogon, covered by Transfer Certificate of Title (TCT) No. T-66626 containing an area of twenty thousand (20,000) square meters. On April 19, 2010, Ms. Roque executed a Deed of Absolute Sale over said property in favor of NHA, with TIN 916-384-000, for a consideration of P2,600,000.00. The property will be utilized by NHA for its socialized housing program for the benefit of the N. Roque Homeowners Association Inc. In support of your request, you have completely submitted the following documents to this Office: 1) Written Application for Exemption filed with the law Division; 2) Certified True Copy of the Transfer Certificate; 3) Original Copy of the Tax Declaration of the property; 4) Certified True Copy of the Deed of Absolute Sale; 5) TIN of the parties; 6) Certificate of Registration of the Association from Home Insurance and Guaranty Corporation with articles of incorporation and By-laws; 7) Certification from NHA that it is extending loan to the Association for lot acquisition; 8) Schematic Subdivision Plan; and 9) List of Beneficiaries. In reply, please be informed that pursuant to sections 19 and 20 of 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. AHSaTI "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: xxx xxx xxx (2) Capital gains tax on raw lands used for the project; xxx xxx xxx" the landowner who sell his property for use in socialized housing project is exempt from payment of capital gains tax and from the expanded withholding tax under Revenue Regulations No. 2-98. Such being the case, the sale of the aforementioned property to the NHA is exempt from the capital gains tax and the expanded withholding tax. Moreover, the Deed of Absolute Sale conveying the real property to NHA is also not subject to the documentary stamp tax under Section 196 of the 1997 Tax Code, as amended, considering that under Revenue Memorandum Circular (RMC) No. 42-2001 dated October 5, 2001, the exemption from documentary stamp tax of the NHA in connection with any of its socialized housing projects extends to the other party (either seller or buyer) that deals or transact with the NHA. Consequently, Ms. Roque, as the other party to the sale transaction, shall also be exempt from the payment of documentary stamp tax. On the other hand, the transfer by NHA to the Homeowner's Association of the aforesaid real property is not subject to any tax considering that NHA only acted as a coordinating agency in providing shelter to the underprivileged and homeless citizens in pursuance of its mandated function. If, in any case, the Homeowner's Association will transfer the real property to the individual member-beneficiaries thereof, said conveyance is likewise 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 property 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 property to the members considering that the members of the association could not donate a property which belongs to them (member-beneficiaries). Furthermore, the deed to be executed by the Homeowner's Association to effect the aforesaid transfer in favor of its individual member is not subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. However, the notarial acknowledgement 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. Moreover, 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 NHA shall be caused to 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 [SH-(053) 383-09] dated June 19, 2009 . 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. HEIcDT Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue