BIR Ruling No. 171-13

May 9, 2013 BIR RULING NO. 171-13 RA No. 7279; BIR Ruling No. 130-10; BIR Ruling No. 040-10 Aguinaldo Village Homeowners Association, Inc. (AVHOAI) Aguinaldo Village, Pandatung Hermosa, Bataan Attention: Elpina C. Nacional President Gentlemen : This refers to the letter of Ma. Ana R. Oliveros, President of Social Housing Finance Corporation dated February 28, 2013, endorsing the sale transaction between Spouses Carmelito E. Aguinaldo, Imelda P. Aguinaldo and Aguinaldo Village Homeowners Association, Inc. (AVHOAI) for 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. Documents submitted disclose that Spouses Carmelito E. Aguinaldo and Imelda P. Aguinaldo with Tax Identification Numbers 132-169-893-000 and 206-538-946-000, respectively, 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. T-278604 1,637 27254 T-278611 5,978 27261 7,615 ===== issued by the Registry of Deeds for the Province of Bataan. The aforesaid properties are situated at Brgy. Pandatung, Hermosa, Bataan. Aguinaldo Village Homeowners Association, Inc. (AVHOAI), on the other hand, is a homeowner's organization registered with the Housing and Land Use Regulatory Board (HLURB) with Tax Identification No. 256-985-184-000. On January 29, 2013, the parties executed a Deed of Absolute Sale whereby the owners transferred and conveyed One Thousand Seven Hundred Nineteen square meters (1,719 sq.m.) portion of the subject properties to AVHOAI at an agreed price of One Million Thirty One Thousand Four Hundred Pesos (P1,031,400.00). Pursuant to the certification issued by Social Housing Finance Corporation (SHFC), One Thousand Seven Hundred Nineteen square meters (1,719 sq.m.) out of the total Seven Thousand Six Hundred Fifteen square meters (7,615 sq.m.) covered by TCT Nos. T-278604 and T-278611 actually comprise a CMP Project and shall be proportionately distributed to the association's qualified member-beneficiaries. 1 For this purpose, AVHOAI secured a housing loan under the Community Mortgage Program (CMP), a financing assistance program of the SHFC a subsidiary of the National Home Mortgage Finance Corporation (NHMFC). CHATcE 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 property for use in a socialized housing project are exempt from the payment of capital gains tax, if sold by an individual, estate, or trust, or the ordinary corporate income tax and expanded withholding tax if sold by a corporation. Such being the case, the sale by Spouses Carmelito C. Aguinaldo and Imelda P. Aguinaldo of the aforestated properties to AVHOAI of the One Thousand Seven Hundred Nineteen square meters (1,719 sq.m.) portion of the properties covered by TCT Nos. T-278604 and T-278611 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 caused to be annotated by the Register of Deeds having jurisdiction over the property, to the effect that the said properties shall be used for socialized housing pursuant to RA 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 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) ATcaEH 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) 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 Aguinaldo Village Homeowners Association, Inc. (AVHOAI) Aguinaldo Village, Pandatung Hermosa, Bataan Name of Beneficiary Blk. No. Lot No. Total Area (sq.m.) 1. Ma. Olivia E. Alquizar 1 2 114.00 2. Maribel E. Alquizar 1 3 100.00 3. Ronald M. Nacional 2 2 102.00 4. Lorna D. Yandoc 2 3 93.00 5. Elpina C. Nacional 2 4 102.00 6. Rosie S. Gutierrez 4 2 100.00 7. Benjamin R. Bedua 4 3 100.00 8. Jonald B. Salas 4 5 131.00 9. Arminda A. Capistrano 4 6 97.00 10. Arnel D. Perez 5 2 100.00 11. Jesus T. Hicom 6 2 89.00 12. Noel S. Nagera 6 3 93.00 13. Rosie H. Macalinao 6 4 84.00 14. Gerino M. Vivas 6 5 100.00 15. Amando G. Torres 6 6 105.00 16. Darius P. Gutierrez 6 8 104.00 17. Reneflor C. Molejon 6 9 105.00 Footnotes 1. See Annex for the masterlist of qualified beneficiaries.