BIR Ruling No. 169-13

May 6, 2013 BIR RULING NO. 169-13 RA No. 7279; BIR Ruling No. 130-10; BIR Ruling No. 040-10 Villa Delgado Homeowners' Association, Inc. Brgy. 170, Caloocan City Attention: Jean E. Aviles President Gentlemen : This refers to the letter of Ma. Ana R. Oliveros, President of Social Housing Finance Corporation dated October 22, 2012, requesting tax exemption from the payment of Capital Gains Tax and other taxes in accordance with the Republic Act No. 7279, otherwise known as the Urban Development and Housing Act of 1992. It appears that Spouses Margarito A. Delgado (TIN 419-459-860-000) and Mercedes Delgado (TIN 112-392-458-000) are the registered owners of parcels of land covered by two (2) Transfer Certificates of Title, to wit: TCT No. Area (sq. m.) Tax Declaration No. 229796 500 24-170-00198-R C-409079 300 24-170-00555-10-R issued by the Registry of Deeds for the Kaloocan City. The aforesaid properties are situated at Brgy. 170, Caloocan City. Villa Delgado Homeowners' Association, Inc., on the other hand, is a homeowners organization registered with the Housing and Land Use Regulatory Board (HLURB) with Tax Identification No. 299-417-167-000. On September 5, 2012, the parties executed a Deed of Absolute Sale whereby the owners, thru their Attorney-in-Fact, Mercedes Delgado, transfer and convey the subject property to Villa Delgado Homeowners' Association, Inc. at an agreed price of One Million Five Hundred Twenty Thousand Pesos (P1,520,000.00). Pursuant to a certification issued by Social Housing Finance Corporation, the properties covered by TCTs No/s. 229796 and C-409079 are actually CMP Projects and shall be proportionately distributed to the association's twenty two (22) qualified member-beneficiaries. 1 For this purpose, Villa Delgado Homeowners' Association, Inc. secured a housing loan under the Community Mortgage Program (CMP), a financing assistance program of the Social Housing Finance Corporation (SHFC) a subsidiary of the National Home Mortgage Finance Corporation (NHMFC). CacISA In reply, please be informed that pursuant to Section 32 of RA No. 7279, pertinent portions of which state that: "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 of the aforestated properties by the owners thru their Attorney-in-Fact, Mercedes Delgado to Villa Delgado Homeowners' Association, Inc. 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 Certificates of Titles of the lands 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 properties shall be used for socialized housing pursuant to R.A. No. 7279. (BIR Ruling No. 130-10 dated December 1, 2010) However, the documentary stamp tax is not one of the taxes covered by the tax exemption clause in Section 32 of RA 7279. Accordingly, the owners thru their Attorney-in-Fact, Mercedes Delgado are liable to pay the documentary stamp tax on the document conveying the afore-stated properties imposed under Section 196 of the Tax Code of 1997, based on the consideration contracted to be paid for such realties or their fair market value determined in accordance with Section 6 (E) of the said Code, whichever is higher. (BIR Ruling No. 130-10 dated December 1, 2010) 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 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. (BIR Ruling No. 040-10 dated August 27, 2010) ICAcHE 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. 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 Villa Delgado Homeowners' Association, Inc. Brgy. 170, Caloocan City Name of Beneficiary Blk. No. Lot No. Total Area (sq.m.) 1 FELICISMA V. DACASIN 1 1 36.2319 2 ROMEO C. GACUTAN 1 2 36.2319 3 CRISBELLE MARIE P. AROMIN 1 3 39.1304 4 JONATHAN PALLAYA 1 4 39.1304 5 JULIUS B. OCAMPO 2 5 34.7826 6 GENEFFIN P. CONCEPCION 2 6 36.2319 7 KELVIN E. PADILLA 2 7 34.7826 8 WINCESLAO B. YANGUAS 2 8 36.2319 9 CHRISTOPHER D. HABAGAT 2 9 36.2319 10 GREG O. MARZAN 2 10 36.2319 11 ROLANDO E. CORREA 2 11 36.2319 12 MIKHAIL GEORGE B. MARZAN 2 12 36.2319 13 ALEXANDER G. FULGAR 2 13 36.2319 14 ANTHONY E. ALCANTARA 3 14 34.7826 15 JEAN E. AVILES 3 15 36.2319 16 ROLANDO C. MERCADER 3 16 36.2319 17 FELY MALAA 3 17 37.6812 18 CARMARLIE SICAT 3 18 36.2319 19 RUBIELYN MALAA 3 19 36.2319 20 JOHN ANDREW A. TALITE 3 20 36.2319 21 JERRY P. RAMOS 3 21 36.2319 22 JOEVILLE A. TALITE 3 22 36.2319 Footnotes 1. See Annex for the masterlist of qualified beneficiaries.