BIR Ruling No. 130-10

December 1, 2010 BIR RULING NO. 130-10 RA 7279; BIR Ruling No. 501-93; BIR Ruling No. DA-567-98; BIR Ruling No. SH-(110)710-09 Samagkatabing-Ilog Village Homeowners Association, Inc. Brgy. Market Area, Sta. Rosa, Laguna Attention: Mr. Mario L. Merondo President Gentlemen : This refers to the letter of the HUDCC Secretary General dated February 19, 2010 forwarding the letter of SAMAGKATABING-ILOG VILLAGE HOMEOWNERS ASSOCIATION, INC. ("Samagkatabing-Ilog Village HOA" for brevity) requesting exemption from the payment of capital gains tax relative to the sale of a parcel of land by MELENCIO PARAKIKAY in favor of the aforementioned Homeowners Association pursuant to Republic Act No. 7279 otherwise known as the "Urban Development and Housing Act of 1992". It is represented that Melencio Parakikay, with Taxpayer's Identification No. 119-983-445, is the registered owner of a parcel of land located at Sta. Rosa, Laguna with an area of 5,867 sq. m. more or less and covered by Transfer Certificate of Title (TCT) No. T-380097 issued by the Registry of Deeds for Calamba; that Samagkatabing-Ilog Village HOA with Taxpayer's Identification No. 221-391-461-000, is a non-stock, non-profit organization duly registered with the Housing and Land Use Regulatory Board (HLURB) with Registration No. 01449-R4-02-11 dated November 6, 2002; that on December 9, 2009, a Deed of Absolute Sale was executed by Melencio Parakikay in favor of Samagkatabing-Ilog Village HOA under the Community Mortgage Program (CMP) of the Social Housing Finance Corporation (SHFC) for the sale of a portion of the above described property with an area of 2,531.67 sq. m. at the agreed price of Three Million Seven Hundred Ninety Seven Thousand Five Hundred Five Pesos (P3,797,505.00), wherein Two Million Two Hundred Sixty Four Thousand Seven Hundred Sixty Pesos (P2,264,760.00) was paid by SHFC; that said purchase of the property covered by TCT No. T-380097 is certified by the SHFC as a CMP project and qualified for capital gains tax exemption under R.A. 7279; that the following individuals (collectively referred to as the "beneficiaries") are those who availed of the CMP according to the master-list of beneficiaries: Lot Allocation Name of Beneficiary Blk. No. Lot No. Total Area (sq.m.) 1 Dollesin, Oscar G. 1 1 65.60 2 Fernando, Joan M. 1 2 54.67 3 Almodovar, Alicia D. 1 3 54.67 4 Cabales, Joel S. 1 6 54.67 5 Timbanan, Charito C. 1 7 54.67 6 Marbella, Emeterio N. 1 8 54.67 7 Acaso, Marlou Q. 1 9 54.67 8 Decena, Ramon D. 1 10 54.67 9 Esguerra, Cris A. 1 12 54.67 10 Macahilig, Mark F. 1 13 54.67 11 Adobas, Marianita A. 1 14 54.67 12 Alinsod, Maria Luisa A. 1 15 61.50 13 Dalimoos, Rustico S. 1 16 54.67 14 Pusing, Lolita S. 1 18 54.67 15 Cadavedo, Ronald L. 1 19 54.67 16 Fernando, Felipe L. 1 21 54.67 17 Ilao, Rodelio M. 1 24 68.34 18 Napagal, Ma. Sisa C. 1 27 54.67 19 Marin, Joseph C. 1 28 54.67 20 Oliquino, Amilia M. 1 29 54.67 21 Velasco, Bruno L. 1 31 54.67 22 Fernando, Gilbert S. 1 37 54.67 23 Abiada, Sharao Leigh C. 1 38 54.67 24 Sazon, Braulio, Jr. P. 1 39 54.67 25 Esguerra, Marilyn A. 1 40 54.67 26 Esguerra, Rolando A. 1 41 54.67 27 Calupaz, Feliciano G. 2 2 69.70 28 Baliguat, Richie F. 2 3 54.67 29 Estolloso, Ranilo B. 2 4 54.67 30 Abonita, Melvin R. 2 5 54.67 31 Maloles, Danilo R. 2 6 71.07 32 Ellosca, Geraldine M. 2 7 54.67 33 Merondo, Mario L. 2 9 54.67 34 Landagan, Ricardo T. 2 11 71.07 35 Biacoro, Reynold F. 2 12 54.67 36 Candelaria, Manuel M. 2 16 71.07 37 Salandanan, Leticia F. 2 18 54.67 38 Nas, Nelly G. 2 19 54.67 39 Barrientos, Enrico D. 2 20 54.67 40 Esguerra, Roberto A. 2 21 69.70 41 Biacoro, Teresita D. 2 22 69.70 and that the Documentary Stamp Tax (DST) due thereon was paid on December 29, 2009. ADaECI In support of its request, Samagkatabing-Ilog Village HOA has completely submitted on April 29, 2010 the following documents: 1. Written Application for Exemption indorsed to the Law Division by the LTS Service-Regular; 2. Certified true copy of the Deed of Absolute Sale; 3. Copy of the Transfer Certificate of Title (TCT); 4. Copy of the Tax Declaration; 5. Photocopy of the DST Return and Land Bank BTR Deposit Slip; 6. Certification from the SHFC that the purchase of property qualifies under CMP; 7. Copy of the Certificate of Registration of Samagkatabing-Ilog Village HOA with the HLURB; 8. Certified true copy of the Articles of Incorporation and By-laws of the Samagkatabing-Ilog Village HOA; 9. Certified true copy of the Masterlist of qualified beneficiaries; 10. BIR Certificate of Registration of Samagkatabing-Ilog Village HOA ; 11. Duplicate Original of the Approved Subdivision Plan. In reply, please be informed that pursuant to Sections 20 and 32 of R.A. No. 7279, pertinent portions of which read: "Sec. 20. Incentives for Private Sector Participating in Socialized Housing. To encourage greater participation in socialized housing, and further reduced 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) . . . (2) Capital gains tax on raw lands used for the project;" xxx xxx xxx "SECTION 32. Incentives. To encourage its wider implementation, participants in the CMP shall be granted with the following privileges or incentives: (a) . . . (b) Properties sold under the CMP shall be exempted from the capital gains tax; xxx xxx xxx" the land owners is exempt from the payment of capital gains tax and expanded withholding tax on the conveyance of the property, corresponding to the portion thereof that will be sold to a community association under CMP. Upon issuance of this letter of exemption, and upon registration of the documents of sale, a lien on the Certificate of Title of the land to be issued in the name of the Homeowners Association shall be caused to be annotated by the Register of Deeds having jurisdiction over the properties, to the effect that the said property shall be used for socialized housing pursuant to R.A. No. 7279. ( BIR Ruling No. 501-93 dated December 22, 1993 ) However, it is observed that documentary stamp tax is not one of the taxes covered by the tax exemption clause in Sections 20 & 32 of RA No. 7279. Such being the case, the document conveying the property to you under the CMP shall be subject to documentary stamp tax imposed under Section 196 of the Tax Code, as amended, based on the consideration contracted to be paid for such realty or on its fair market value determined in accordance with Section 6 (E) of the said Code, whichever is higher. ( BIR Ruling No. DA-567-98 dated December 18, 1998; BIR Ruling No. SH-(110)710-09 dated November 13, 2009 ) 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 title in the name of the Homeowners Association 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. Notwithstanding the foregoing, the Bureau of Internal Revenue shall conduct verification and post-audit that the actual occupants of the properties transferred under the CMP are qualified beneficiaries and therefore, the sellers are entitled to exemption from capital gains tax or income tax imposed under the Tax Code of 1997. CSEHcT 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, and/or any of the requirements set forth in this letter are not complied with, then this ruling shall be considered null and void. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue