BIR Ruling No. 171-15

June 8, 2015 BIR RULING NO. 171-15 RA 7279; BIR Ruling No. 473-2014; BIR Ruling No. 304-2013 Zephyr Construct Philippines, Inc. Unit 401 Guildford Bldg. Manors at Celebrity Place, Condominium Capitol Hills Drive, Old Balara Quezon City Attention: Regina G. Bello President Gentlemen : This refers to your letter dated March 9, 2015 requesting issuance of Certificate of Tax Exemption for the socialized housing project under the Yolanda Housing Project located at Brgy. Gogo, Estancia, Iloilo pursuant to Republic Act (R.A.) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". caITAC Documents submitted show that Ayn Marie R. Flores (TIN: 300-347-929-000) and Aiza R. Flores (TIN: 291-671-850-000) (hereinafter referred to as Landowners) are the registered owners of parcels of land covered by two (2) Original Certificates of Title (OCT) located Brgy. Gogo, Estancia, Iloilo, to wit: Landowners OCT Area (sq. m.) Ayn Marie R. Flores F-46594 35,108 Aiza R. Flores F-46473 38,237 Total Area 73,345 ===== all issued by the Registry of Deeds for Iloilo. The following Deeds of Absolute of Sale conveying portions of the abovementioned properties were executed by the landowners to the National Housing Authority (NHA) (TIN: 000-916-384-012), a government corporation organized and existing by virtue of Presidential Decree No. 757, as amended: Date of Deed of Consideration Area (sq. m.) Landowners Absolute Sale OCT (PhP) Ayn Marie R. Flores March 9, 2015 F-46594 2,285,200.00 22,852 Aiza R. Flores March 9, 2015 F-46473 2,792,100.00 29,921 Total 5,077,300.00 52,773 ========== ====== The above described properties has been identified and certified for development into a residential project under the Yolanda Permanent Housing Program intended for the families affected by Typhoon Yolanda and qualified for housing assistance under R.A. No. 7279. The NHA has issued a Notice of Award dated December 4, 2014 to Zephyr Construct Philippines, Inc. for the " Procurement of Fully Developed Lots and Completed Housing Units under the NHA's Yolanda Housing Program located at Site 2 Brgy. Gogo, Estancia, Iloilo-340 Housing Units " at a contract price of Ninety Eight Million Five Hundred Ninety Seven Thousand Five Hundred Ninety Five Pesos (P98,597,595.00). In reply, please be informed that pursuant to Sections 19 and 20 of Republic Act (RA) No. 7279, pertinent portions of which state that: "Sec. 19. Incentives for the National Housing Authority. The National Housing Authority, being the primary government agency in charge of providing housing for the underprivileged and homeless, shall be exempted from the payment of all fees and charges of any kind, whether local or national, such as income and realty taxes. All documents or contracts executed by and in favor of the National Housing Authority shall also be exempt from the payment of documentary stamp tax and registration fees, including fees required for the issuance of transfer certificates of title. ICHDca "Sec. 20. Incentives for Private Sector Participating in Socialized Housing . To encourage greater private sector participation in socialized housing and further reduce the cost of housing units for the benefit of the underprivileged and homeless, the following incentives shall be extended to the private sector: xxx xxx xxx "(d) Exemption from the payment of the following: (1) . . . (2) Capital Gains Tax;" xxx xxx xxx The landowner who sells his property for use in a socialized housing project is exempt from the payment of the capital gains tax. Such being the case, the sale by Ayn Marie R. Flores and Aiza R. Flores to NHA of a portion of their respective properties with an aggregate area of 52,773 sq. m. out of 73,345 sq. m. covered by OCT Nos. F-46594 and F-46473 is exempt from capital gains tax. (BIR Ruling No. 473-2014 dated November 24, 2014) Moreover, pertinent portions of Revenue Memorandum Circular (RMC) No. 42-01 dated October 5, 2001, provide that: xxx xxx xxx A. National Housing Authority (NHA) The NHA, being the primary government agency in charge of providing housing for the underprivileged and homeless citizens shall be exempted from the payment of the following national internal revenue taxes: (1) . . . (2) Documentary stamp tax on sales transactions executed by and in favor of the NHA in connection with socialized housing projects. Since Section 19 of R.A. 7279 exempts "all documents or contracts executed by and in favor of the NHA," the exemption from documentary stamp tax extends to the other party (either seller or buyer) that is dealing or transacting with the NHA. xxx xxx xxx The exemption from documentary stamp tax of NHA in connection with any of its socialized housing project extends to the other party (either seller or buyer) that deals or transacts with the NHA. Consequently, since NHA is a party to the sale, no documentary stamp tax shall be due on such sale. Accordingly, the sale transaction executed by Ayn Marie R. Flores and Aiza R. Flores in favor of the NHA of the 52,773 sq. m. portion out of 73,345 sq. m. covered by OCT Nos. F-46594 and F-46473 are likewise exempt from documentary stamp tax imposed under Section 196 of the Tax Code of 1997, as amended. (BIR Ruling No. 036-2014 dated January 29, 2014) TCAScE Moreover, under Section 109 (1) (P) of the Tax Code of 1997, as amended by R.A. 9337, the sale of real properties utilized for low-cost and socialized housing as defined by R.A. No. 7279 shall be exempt from value-added tax (VAT), thus, the sale of real properties covering 52,773 sq. m. out of 73,345 sq. m. covered by OCT Nos. F-46594 and F-46473 by the landowners to NHA for purposes of the Yolanda Permanent Housing Program is exempt from the imposition of VAT. (BIR Ruling No. 304-2013 dated August 6, 2013) Upon application for exemption, a lien on the titles of the lands shall be annotated by the Register of Deeds having jurisdiction over the properties, to the effect that the same is to be applied or is being applied to socialized housing project pursuant to RA 7279. 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 lands 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) after the submission of the requirements provided under Revenue Memorandum Order (RMO) No. 15-2003. 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. cTDaEH Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue