Sale of Real Property under CMP Exempt from Capital Gains Tax

May 10, 1993 BIR RULING NO. 201-93 SALE OF REAL PROPERTY UNDER CMP EXEMPT FROM CAPITAL GAINS TAX 21 (e), 24 45-93 201-93 Development Resources Corporation Room 214, Federation Center Building Muelle de Binondo, Binondo, Manila Attention: Mr . Carlos Chua President This refers to your letter dated November 1, 1992, in effect, requesting for a ruling that the sale of your real properties located at Bgy. Centro, Agdao, Davao City, to North San Juan Village Homeowners Association, Inc., a duly registered non-stock, non-profit community organization in accordance with the Community Mortgage Program (CMP), initiated by the National Housing Authority (NHA), is exempt from capital gains tax pursuant to Section 32 (b) of R.A. 7279, otherwise known as the Urban Development and Housing Act of 1992. cdtech It appears that the Community Mortgage Program (CMP) is a mortgage financing program of the National Home Mortgage Finance Corporation (NHMFC), which assists legally organized associations of underprivileged and homeless citizens to purchase and develop a tract of land under the concept of community ownership; that through a Letter-Guaranty by said Government Financing Association the landowner executes a Deed of Sale to the Association which stands as the borrower and debtor to the extent of the total amount paid by NHMFC to the landowner; that in the instant case, the properties being sold to North San Juan Village Homeowners Association, Inc. are covered by TCT Nos. T-44674 and T-44678, issued by the Registry of Deeds of Davao City; that the said transaction was certified by the National Housing Authority as an approved project under the Community Mortgage Program (CMP) of the government. Field verification conducted in this case disclosed that the registered members of the North San Juan Village Homeowners Association, Inc. are composed of the less privileged and homeless individuals, and are qualified beneficiaries of the Community Mortgage Program of the government; that they are the actual occupants and/or about to occupy the entire properties sold to them; that the said community association, which will stand as the buyer-borrower, whose members in turn, will pay the association thru monthly amortization. In reply, please be informed that pursuant to Section 32 of R.A. No. 7279, pertinent portion of which reads: "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 exempt from the capital gains tax; and xxx xxx xxx the landowners who sell their property to the Tenant's Association, pursuant to the Community Mortgage Program, are exempt from the payment of capital gains tax and from the expanded withholding tax Revenue Regulations No. 1-90. Upon the sale thereof, the capital gains realized by the owner shall be exempt from the capital gains tax, pursuant to the aforequoted provisions of R.A. 7279. Such being the case, the sale of your real properties located at Bgy. Centro, Agdao, Davao City, to North San Juan Village Homeowners Association, Inc. is exempt from the capital gains tax and the expanding withholding tax. However, it is observed that the documentary stamp tax is not one of the taxes covered by the tax exemption clause under Sections 20 and 32 of R.A. 7279. Such being the case, you are liable to pay the documentary stamp tax on the document conveying the property to the Association under the CMP as imposed under Section 196 of the Tax Code, as amended, based on the actual consideration paid by the association to you. cd VICTOR A. DEOFERIO, JR. Deputy Commissioner of Internal Revenue