Sale of Land under CMP Exempt from Capital Gains Tax

April 29, 1993 BIR RULING NO. 156-93 SALE OF LAND UNDER CMP EXEMPT FROM CAPITAL GAINS TAX 21 (e), 196 122-93 156-93 Mr. Felipe M. Buencamino Suite 206, GD Building 18 Quezon City This refers to your letter, dated March 10, 1993, in effect, requesting for a ruling that the sale of your real properties located at Bgy. San Isidro, Angono, Rizal to the Samahang Magsasaka ng Rosario Village, Pasig, Inc. (SMRVP), a duly registered non-stock, non-profit community organization in accordance with the Community Mortgage Program (CMP) initiated by the Center for Housing and Human Ecology Development Foundation (CHHED) is exempt from capital gains tax pursuant to Section 32(b) of R.A. 7279, otherwise known as the Urban Development and Housing Act of 1992. aisadc It appears that the Community Mortgage Program (CMP) is a mortgage financing program of the National Home Mortgage Finance Corporation (NHMFC) which assists legally organized associations of underprivileged and homeless citizens to purchase and develop a tract of land under the concept of community ownership; that through a Letter-Guaranty by said Government Financing Institution the landowner executes a Deed of Sale to the Association which stands as the borrower and debtor to the extent of the total amount paid by NHMFC to the landowner; that in the instant case, the properties being sold to the Samahang Magsasaka ng Rosario Village, Pasig, Inc. are covered by TCT Nos. 588983 and 588988 issued by the Registry of Deeds of the Province of Rizal; that the said transaction was certified by the National Home Mortgage Finance Corporation as an approved project under the Community Mortgage Program (CMP) of the government. Field verification conducted in this case disclosed that the registered members of the Samahang Magsasaka ng Rosario Village, Pasig, Inc (SMRVP) are composed of the less privileged and homeless individuals, and are qualified beneficiaries of the Community Mortgage Program of the government; that they are the actual occupants and/or about to occupy the said properties subject to the sale, as evidenced by the Masterlist of beneficiaries and loan apportionment and subdivision plan, covering the entire properties sold to them; that the NHMFC will undertake to pay the landowner in the account of the said community association, who will stand as the buyer-borrower, whose members in turn, will pay the association thru monthly amortizations. In reply, please be informed that pursuant to Section 32 of R.A. No. 7279, pertinent portions of which reads: "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 xxx xxx xxx the landowners who sell their property to the Tenant's Association pursuant to the Community Mortgage Program are exempt from the payment of capital gains tax and from the expanded withholding tax Revenue Regulations No. 1-90. Upon the sale thereof, the capital gains realized by the owners shall be exempt from the capital gains tax pursuant to the aforequoted provisions of R.A. 7279. Such being the case, the sale of your real properties located at Bgy. San Isidro, Angono, Rizal to the Samahang Magsasaka ng Rosario Village, Pasig, Inc. is exempt from the capital gains tax and the expanded withholding tax. 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. 7279. Such being the case, you are liable to pay the documentary stamp tax on the document conveying the properties to the Association under the CMP as imposed under Section 196 of the Tax Code, as amended, based on the actual consideration paid by the association to you. VICTOR A. DEOFERIO, JR. Deputy Commissioner of Internal Revenue