Handog Sa Iyo Anak II Homeowners Association, Inc.

May 16, 2016 BIR RULING NO. 189-16 Section 32, RA No. 7279; BIR Ruling No. 053-15 Handog Sa Iyo Anak II Homeowners Association, Inc. Pingkian II, Brgy. Pasong Tamo, Tandang Sora, Quezon City Attention: Elohim U. Figueroa President Gentlemen : This refers to the letter of Ma. Ana R. Oliveros, President of the Social Housing Finance Corporation (SHFC) dated October 12, 2015, endorsing the sale transaction between Esther L. Hsia and Handog Sa Iyo Anak II Homeowners Association, Inc. for exemption from the payment of Capital Gains Tax and other taxes in accordance with the Republic Act (RA) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". Documents submitted disclose that Esther L. Hsia is the registered owner of a parcel of land, identified as Lot 4 of the consolidation-subdivision plan (LRC) Pcs-375, being a portion of the consolidation of Lots 725-A-6, 725-A-7 and 725-A-8 described on plan (LRC) Psd-787 and Lot 725-L, described on plan Psd-42195, LRC Record No. 5975 covered by Transfer Certificate of Title (TCT) No. RT-78805 (50325) issued by the Registry of Deeds for the Quezon City. The aforesaid property is situated at Brgy. Pasong Tamo, Tandang Sora, Quezon City with an area of Eight Hundred Thirty Five square meters (835 sq.m.), more or less. Handog Sa Iyo Anak II Homeowners Association, Inc. (TIN 424-027-075-000), on the other hand, is a homeowner's organization duly registered with the Housing and Land Use Regulatory Board (HLURB). On July 14, 2015, the parties executed a Deed of Absolute Sale whereby Esther L. Hsia transferred and conveyed the subject property to Handog Sa Iyo Anak II Homeowners Association, Inc. at an agreed price of Two Million Five Hundred Five Thousand (P2,505,000.00). Pursuant to the certification issued by SHFC, the subject property covered by TCT No. RT-78805 (50325) actually comprises a Community Mortgage Program (CMP) Project and shall be proportionately distributed to the association's qualified member-beneficiaries. 1 For this purpose, Handog Sa Iyo Anak II Homeowners Association, Inc. secured a housing loan under the CMP, a financing assistance program of the SHFC a subsidiary of the National Home Mortgage Finance Corporation (NHMFC). Documentary Stamp Tax (DST) due on the sale has been paid. AcICHD In support of its request, Handog Sa Iyo Anak II Homeowners Association, Inc. has completely submitted on February 5, 2016 the following documents: 1) SHFC letter application for tax exemption; 2) Certification of the President of the SHFC that the subject property qualifies and is actually a CMP project; 3) SHFC Letter of Guaranty No. 1113; 4) Certified true copy of the Deed of Absolute Sale to the Community Association; 5) Certified true copy of the Articles of Incorporation of the Community Association; 6) Certified true copy of the Masterlist of Qualified Beneficiaries duly certified by the SHFC; 7) Certified true copies of the TCT and Latest Tax Declaration of the Property Sold to the Community Association; 8) Certified true copy of the Location Plan of the Lot Sold to the Community Association; 9) TIN ID/BIR Certificate of Registration of the seller and the Homeowner Association; and 10) Other pertinent documents . 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 by Esther L. Hsia to Handog Sa Iyo Anak II Homeowners Association, Inc. of the subject property covered by TCT No. RT-78805 (50325) 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 Homeowner's Association shall 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 RA No. 7279. (BIR Ruling No. 053-15 dated February 27, 2015) However, the documentary stamp tax is not one of the taxes covered by the tax exemption clause in Sec. 32 of RA 7279. Accordingly, the landowner 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. 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. 053-15 dated February 27, 2015) 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 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 Masterlist of Beneficiaries and Loan Apportionment Footnotes 1. See Annex for the masterlist of qualified beneficiaries consisting of one (1) page.