BIR Ruling No. 147-10

December 17, 2010 BIR RULING NO. 147-10 RA 7279; BIR Ruling No. 234-92 El Regalo Homeowners Association, Inc. Zambowood, Zamboanga City Attention: Rodel C. Gabawa President Gentlemen : This refers to your letter dated May 11, 2010, indorsed to this Office by BIR Revenue Region No. 15 Zamboanga City, requesting for exemption from capital gains taxes on the sale of a real property by Henry L. Chew in favor of El Regalo Homeowners Association ("El Regalo" for brevity). It is represented that El Regalo with office and business address at Zambowood, Zamboanga City is a non-stock-non-profit association with Taxpayer Identification No. 006-286-896 and that it is duly registered with the Housing and Land Use Regulatory Board (HLURB). It has secured a housing loan under the Community Mortgage Program (CMP), a financing assistance program of the Social Housing Finance Corporation (SHFC) and subsidiary of the National Home Mortgage Finance Corporation (NHMFC), for the acquisition of a real property situated in Barrio Lumbayao, Zamboanga City covered by Transfer Certificate of Title (TCT) No. T-192705 with an area of 19,294 sq. m. On April 26, 2010, a Deed of Absolute Sale for the subject real property was executed by Henry L. Chew in favor of El Regalo as represented by its President, Rodel C. Gabawa in the amount of PhP5,209,380.00. In reply, please be informed that pursuant to Section 32 of R.A. No. 7279, pertinent portion of which reads: "Section 32. Incentives. To encourage its wider implementation, participants in the CMP shall be granted with the following privileges or incentives: xxx xxx xxx "(b) Properties sold under the CMP shall be exempt from the capital gains tax; and xxx xxx xxx" the landowner who sells his property to the Association pursuant to the CMP is exempt from the payment of capital gains tax and from the expanded withholding tax under Revenue Regulations No. 1-90, as amended by Revenue Regulations No. 12-94. (BIR Ruling No. 234-92 dated August 27, 1992) IHEAcC In view of the foregoing, the sale of the above-described property in favor of El Regalo is exempt from capital gains tax. 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 Association 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 R.A. No. 7279. However, it is observed that documentary stamp tax is not one of the taxes covered by the tax exemption clause under Sections 20 and 32 of R.A. No. 7279. Such being the case, the landowner is liable to pay the documentary stamp tax on the document conveying the property to the Association under the CMP as imposed under Section 196 of the Tax Code, as amended. cISDHE However, 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 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 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 the capital gains tax or income tax imposed under the Tax Code of 1997. 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. IEHDAT Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue