BIR Ruling No. 173-12

March 9, 2012 BIR RULING NO. 173-12 RA No. 7279; BIR Ruling No. 130-10; BIR Ruling No. 040-10 Kahirup Homeowners Association, Inc. 6th Road, Puentebella Brgy. Taculing, Bacolod City Attention: Ignacio S. Militante President Gentlemen : This refers to the letter of Ma. Ana R. Oliveros, President of Social Housing Finance Corporation dated November 2, 2011, requesting tax exemption from the payment of Capital Gains Tax and other taxes in accordance with Republic Act No. 7279, otherwise known as the Urban Development and Housing Act of 1992. It appears that BACECO FINANCE CORPORATION with Tax Identification Number 000-920-678-000, is the registered owner of a parcel of land, identified as Lot 20, Blk. 14 of the consolidation and subdivision plan Pcs-2710, being a portion of the consolidation of Lots 919 and 924 of the cadastral survey of Bacolod, G.L.R.O. Cad. Record No. 55 covered by Transfer Certificate of Title (TCT) No. T-259672-B issued by the Registry of Deeds for the Bacolod City. The aforesaid property is situated at Bacolod City with an area of one thousand square meters (1,000 sq.m.), more or less. Kahirup Homeowners Association, Inc. with Tax Identification Number 267-782-269-000, on the other hand, is a homeowner's organization registered with the Housing and Land Use Regulatory Board (HLURB). On August 9, 2011, the parties executed a Deed of Sale whereby the owner thru its Attorney-in Fact, Alfredo Q. Gochangco, transfers and conveys one thousand square meters (1,000 sq.m.) of the subject property to Kahirup Homeowners Association, Inc. at an agreed price of Seven Hundred Thousand Pesos (P700,000.00). Pursuant to a certification issued by Social Housing Finance Corporation, one thousand square meters (1,000 sq.m.) of the property covered by TCT No. T-259672-B is actually a CMP Project and shall be proportionately distributed to the association's qualified member-beneficiaries. 1 For this purpose, Kahirup 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). In reply, please be informed that pursuant to Sections 20 and 32 of RA No. 7279, pertinent portions of which state that: HEacAS "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: (d) Exemption from the payment of the following: (2) Capital gains tax on raw lands used for the project; xxx xxx xxx. 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 property by the owner thru its Attorney-in Fact, Alfredo Q. Gochangco to Kahirup Homeowners Association, Inc. is exempt from the capital gains tax. Upon issuance of this letter of exemption, and upon registration of the documents 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 property 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 Sec. 20 of RA 7279. Accordingly, the owner thru its Attorney-in Fact, Alfredo Q. Gochangco is liable to pay the documentary stamp tax on the document 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. 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 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. 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 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. AcSEHT Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue ATTACHMENT KAHIRUP HOMEOWNERS ASSOCIATION, INC. 6th Road, Puentebella, Bacolod City Name of Beneficiary Blk. No. Lot Total Area No. (sq.m.) 1 Gina L. Maguale 1 1 50.00 2 Karla L. Fernandez 1 2 50.00 3 Mary-Ann H. Suacito 1 3 50.00 4 Juanito H. Suacito 1 4 50.00 5 Ranel Z. Flores 1 5 50.00 6 Felix A. Gocotano 1 6 50.00 7 Ma. Sheba P. Calderon 1 7 50.00 8 Judith P. Fernandez 1 8 50.00 9 Ignacio S. Militante, Jr. 1 9 50.00 10 Romeo R. Omison, Jr. 1 10 50.00 11 Roberta L. Flores 2 1 50.00 12 Rolando S. Mahilum 2 2 50.00 13 Sharon A. Llema 2 3 50.00 14 Ricardo N. Abangan 2 4 50.00 15 Renan S. Abangan 2 5 50.00 16 Ariel S. Abangan 2 6 50.00 17 Nelson S. Abangan 2 7 50.00 18 Salvador V. Ramos 2 8 50.00 19 Marcos Z. Doble 2 9 50.00 20 Beverly T. Huertas 2 10 50.00 Footnotes 1. See Annex for the masterlist of qualified beneficiaries.