BIR Ruling No. 155-14

May 29, 2014 BIR RULING NO. 155-14 RA No. 7279; BIR Ruling No. 109-13 Aslum Village Homeowners Association, Inc. Hda. Aslum, Brgy. Daga Cadiz City, Negros Occidental Attention: Alfonso A. Lumawag, Jr. President Gentlemen : This refers to the letter of Ma. Ana R. Oliveros, President of Social Housing Finance Corporation (SHFC) dated November 5, 2013, endorsing the sale transaction between Lope L. Consing married to Ma. Socorro Lizares and Aslum Village Homeowners Association, Inc. for exemption from the payment of Capital Gains Tax and other taxes in accordance with the Republic Act (RA) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". Documents submitted disclose that Lope L. Consing (TIN 126-618-598-000) (hereinafter referred to as Landowner) is the registered owner of a parcel of land, identified as Lot 6, Pcs-06-001177, being in portion of Lots 1, 2, 3, 4 & 10, Pcs-06-001010 covered by Transfer Certificate of Title (TCT) No. T-15872 issued by the Registry of Deeds for City of Cadiz. The aforesaid property is situated at Brgy. Daga, Cadiz City with an area of Thirteen Thousand Eight Hundred Twenty Five square meters (13,825 sq.m.), more or less. Aslum Village Homeowners Association, Inc. (TIN 412-576-921-000), on the other hand, is a homeowner's organization duly registered with the Housing and Land Use Regulatory Board (HLURB). On August 7, 2013, the parties executed a Deed of Absolute Sale whereby the Landowner transferred and conveyed Ten Thousand One Hundred Sixty Six square meters (10,166 sq.m.) of the subject property to Aslum Village Homeowners Association, Inc. at an agreed price of One Million Three Hundred Twenty One Thousand Five Hundred Eighty Pesos (P1,321,580.00). Pursuant to the certification issued by SHFC, Ten Thousand One Hundred Sixty Six square meters (10,166 sq.m.) out of Thirteen Thousand Eight Hundred Twenty Five square meters (13,825 sq.m.) covered by TCT No. T-15872 actually comprise a Community Mortgage Program (CMP) Project and shall be proportionately distributed to the association's qualified member-beneficiaries. 1 For this purpose, Aslum Village Homeowners Association, Inc. secured a housing loan under the CMP, a financing assistance program of the SHFC a subsidiary of the National Home Mortgage Finance Corporation (NHMFC). DHIETc In support of its request, Aslum Village Homeowners Association, Inc. has completely submitted on November 15, 2013 the following documents: 1) SHFC letter application for tax exemption; 2) Certification of the President of the SHFC that the subject property qualifies and is actually a CMP project; 3) Certified true copy of the Letter-Guaranty; 4) Certified true copy of the Deed of Absolute Sale to the Community Association; 5) Certified true copy of the Articles of incorporation of the Community Association; 6) Certified true copy of the Masterlist of Qualified Beneficiaries duly certified by the SHFC; 7) Certified true copies of the TCT and Latest Tax Declaration of the Property Sold to the Community Association; 8) Certified true copy of the Location Plan of the Lot Sold to the Community Association; 9) TIN ID/BIR Certificate of Registration of the seller and the Homeowner Association; and 10) Other pertinent documents. In reply, please be informed that pursuant to Section 32 of RA No. 7279, pertinent portions of which state that: CcAHEI "Sec. 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 exempted from the capital gains tax; and" the landowners who sold their properties for use in a socialized housing project are exempt from the payment of capital gains tax. Such being the case, the sale by the landowners to Aslum Village Homeowners Association, Inc. of Ten Thousand One Hundred Sixty Six square meters (10,166 sq.m.) portion of the property covered by TCT No. T-15872 is exempt from the 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 Homeowners Association shall 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 No. 109-13 dated March 21, 2013) However, the documentary stamp tax is not one of the taxes covered by the tax exemption clause in Sec. 20 of RA 7279. Accordingly, the landowners are liable to pay the documentary stamp tax on the documents conveying the afore-stated property imposed under Section 196 of the Tax Code of 1997, based on the consideration contracted to be paid for such realty or its fair market value determined in accordance with Section 6 (E) of the said Code, whichever is higher. (BIR Ruling No. 109-13 dated March 21, 2013) It is, however, understood 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 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. (BIR Ruling No. 109-13 dated March 21, 2013) THCASc Notwithstanding the foregoing, the Bureau of Internal Revenue shall conduct verification and post-audit that the actual occupants of the property transferred under the CMP are qualified beneficiaries and therefore, the seller is entitled to exemption from 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 ascertained that the facts are different, then this ruling shall be considered as null and void. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue ANNEX Aslum Village Homeowners Association, Inc. Hda. Aslum, Brgy. Daga Cadiz City, Negros Occidental Name of Beneficiary Blk. No. Lot No. Total Area (sq.m.) 1 Felimon, Teresa 1 1 225.00 2 Andura, Lolita 1 2 225.00 3 Duran, Bobby 1 3 225.00 4 Duran, Marissa 1 4 225.00 5 Llabor, Dionesio Jr. 1 5 225.00 6 Bermudes, Cecelia 1 6 225.00 7 Tario, Eva 1 7 243.00 8 Sedeo, Joel 1 8 259.00 9 Galedo, Rex 2 1 236.00 10 Duran, Norman 2 2 236.00 11 Alapan, Rosemarie Galido 2 3 225.00 12 Causing, Gemma 2 4 225.00 13 Matillano, Renold 2 5 225.00 14 Basas, Sheila 2 6 225.00 15 Matillano, Expedito 2 7 245.00 16 Causing, Genie 2 8 244.00 17 Tario, Sharon 3 1 253.00 18 Bantiling, Ronnie 3 2 225.00 19 De Julian, Vevymar 3 3 243.00 20 Causing, Gaspar 3 4 218.00 21 Bermudes, Jubert 3 5 219.00 22 Leonoras, Rosayna 3 6 236.00 23 Bargamento, Eduardo 3 7 230.00 24 Balandra, Cristina 3 8 228.00 25 Bantiling, Jimena 3 9 224.00 26 Villanueva, Jose 3 10 215.00 27 Tario, Dandy 3 11 218.00 28 Gonion, Antonino 3 12 185.00 29 Pastor, Eduardo 4 1 215.00 30 Boniawan, Marcelo 4 2 227.00 31 Requiron, Julie 4 3 211.00 32 Galedo, Romely Sr. 4 4 243.00 33 Llabor, Dolores 5 1 225.00 34 Desotil, Benita 5 2 217.00 35 Valencia, Antonia Nina 5 3 225.00 36 Logarta, Jose Romy 5 4 225.00 37 Duran, Julio Sr. 5 5 105.00 38 Tolentino, Lelma 5 6 231.00 39 Duran, Jovita 5 7 60.00 40 Duran, Albert 5 8 61.00 41 Tario, Aidalyn 6 1 226.00 42 Tario, Janel 6 2 233.00 43 Valencia, Raymund 6 3 231.00 44 Ariola, Marilou 6 4 273.00 45 Ariola, Rex 6 5 274.00 46 Lumawag, Alfonso Jr. 6 6 277.00 Footnotes 1. See Annex for the masterlist of qualified beneficiaries.