Request for Exemption from Payment of Capital Gains Tax on Sale of Real Property under the NHA Community Mortgage Program

July 17, 1992 BIR RULING NO. 208-92 21 (e) 24 000-00 208-92 Mr. & Mrs. Benito P. Fabie 1535 Leon Guinto St., Ermita, Manila Gentlemen : This refers to your letter dated July 15, 1992, in effect, requesting confirmation of your opinion that your sale of real property located at Bgy. Bulajo, Cavinte, Laguna to the Monte Villa Homeowners Association, Inc., a non-stock, non-profit community organization duly registered with Securities and Exchange Commission (SEC) in accordance with the Community Mortgage Program (CMP) initiated by the National Housing Authority is exempt from capital gains tax pursuant to Section 20 of R.A. 7272 which was approved on March 4, 1992 and published in the March 28, 1992 issue of the Philippine Times Journal and Malaya newspapers of general circulation. prcd 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 a Government Financing Institution the National Home Mortgage Finance Corporation (NHMFC) 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 property being sold to the Monte Villa Homeowners Association is owned by the spouses Benito and Erlinda Fabie covered by TCT No. T-125159 of the Registry of Deeds of Laguna; that the said transaction was certified by the National Housing Authority as an approved project under the Community Mortgage Program (CMP) of the government. In reply, please be informed that pursuant to Section 20 of R.A. No. 7279, pertinent portion of which reads: "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) Project-related income taxes; (2) Capital gains tax on raw lands used for the project; xxx xxx xxx the landowners who sell their property to the Tenant's Association pursuant to the Community Mortgage Program are exempt not only from capital gains tax but also on project-related income tax on ordinary gain, and from the expanded withholding tax under Revenue Regulations No. 1-90. Upon the sale thereof, the capital gains realized by the owners shall be exempt from capital gains tax pursuant to the aforequoted provision of R.A. 7279, otherwise known as the urban Development and Housing Act of 1992. cdpr Very truly yours, JOSE U. ONG Commissioner of Internal Revenue