BIR Ruling No. 212-11

July 5, 2011 BIR RULING NO. 212-11 Section 32 of RA No. 7279; BIR Ruling No. 147-10; BIR Ruling No. 234-92 Divisoria Plains Homeowners Association, Inc. Lumiyap, Divisoria Zamboanga City Attention: Ms. Rosemarie F. Covarrubias President Gentlemen : This refers to your letter dated December 8, 2010 requesting, on behalf of the landowner, Mauricio K. Pioquinto, for exemption from the payment of capital gains tax pursuant to Section 32 of Republic Act (RA) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992." Documents submitted disclosed that a Deed of Absolute Sale dated November 25, 2010 was executed by and between Mauricio K. Pioquinto, as the Seller, with TIN 114-353-304, and Divisoria Plains Homeowners Association, Inc., as the Buyer, with TIN 006-286-184, over a parcel of land with an area of 13,147 square meters covered by Transfer Certificate of Title (TCT) No. T-213,870 issued by the Registry of Deeds for Zamboanga City; that the Divisoria Plains Homeowners Association, Inc. is a non-stock, non-profit corporation duly registered with the Housing and Land Use Regulatory Board (HLURB) under Certificate of Registration No. 11954; that the said property has been certified by the Social Housing Finance Corporation, a subsidiary of National Home Mortgage Finance Corporation, as a community mortgage program (CMP) project under RA No. 7279; and that the names of the beneficiaries are as follows: 1. Amilhasan, Zainab 2. Amilhasan, Abdal Saud J. 3. Amilhasan, Sahban T. 4. Amilhasan, Hannah Y. 5. Amilhasan, Amilhamja S. 6. Martinez, Elvira L. 7. Martinez, Rachel L. 8. Petilos, Adilyn E. 9. Arcillas, Marites V. 10. Amparan, Lucelyn V. 11. Laude, Bernardo B. 12. Letada, Ma. Elena 13. Lacson, Luezel LM 14. Llanos, Leticia 15. Llanos, Dennis S. 16. Araquin, Marites aTEADI 17. Diva, Sherly 18. Toledo, Julieta 19. Pineda, Annie Rose D. 20. Aldanese, Gilbert A. 21. Albento, Albino 22. Patero, Wallace R. 23. Valerio, Allan G. 24. Melad, Glenda A. 25. Suriaga, Gina V. 26. General, Vivian 27. Jukuy, Judiecel G. 28. Silang, Christine 29. Barliso, Jolan I. 30. Adonay, Marvin M. 31. Cerbo, Edwin S. 32. Aurea, Jason 33. Aurea, Mary Eleonor 34. Barrega, Annie L. 35. Caser, Caridad 36. Bueno, Judith 37. Serra, Rosita T. 38. Mallari, Jocelyn 39. Hinelo, Arnel G. 40. Emia, Antonio D. 41. Helbero, Romeo 42. Digal, Margie S. 43. Villanueva, Eduardo E. 44. Villanueva, Leticia 45. Mauricio, Wenonah B. 46. De Guzman, Evelyn T. 47. Tangkay, Cecil 48. De Guzman, Joebert 49. De Guzman, Elvira 50. Maghinay, Rea L. CIAcSa 51. De Guzman, Allan R. 52. De Guzman, Phil Ace C. 53. Lucaylucay, Shyn Jean V. 54. Salvador, Gilbert V. 55. Candido, Elena B. 56. Montehermoso, Ailyn V. 57. Prajes, Willinita 58. Tan, Danilo 59. Arcillas, Ricardo A. 60. Noay, Marvin C. 61. Noay, Margarita 62. Tuble, Jenelyn 63. Valerio, Jayson A. 64. Abayle, Julieta S. 65. Ediza, Gracelie S. 66. Mahinay, Roldan 67. Narciso, Martino 68. Pardillo, Wilson 69. De Guzman, Mary Cris 70. Villanova, Cherry Mae C. 71. Villanova, Ronnie C. 72. Badio, Virginia E. 73. Cacao, Windelyn Grace 74. Teodoro, Georgia 75. Adjumuddin, Maribel 76. Alcario, James 77. Cabactulan, Elisa 78. Tolorio, Lorna E. 79. Flores, Gerlie Marie P. 80. Atil, Pablo 81. Asombrado, Mercy Gette 82. Asombrado, Gabriel T. 83. Rojas, Christopher R. 84. Covarrubias, Jose Mari 85. Mira, Ivy M. CAIHTE 86. Mauricio, Wendy In support of your request, you have submitted the following documents, to wit: 1. Certification from the Social Home Mortgage Finance Corporation stating among others that the Divisoria Plains Homeowners Association, Inc. is securing a housing loan under the CMP; 2. Deed of Absolute Sale between Mauricio K. Pioquinto and Divisoria Plains Homeowners Association, Inc.; 3. Certified true copy of the Articles of Incorporation; 4. Masterlist of Qualified Member/Beneficiaries; 5. Certified true copy of TCT No. T-213,870; 6. Certified true copy of the Tax Declaration; 7. Location Plan of the Lot; 8. BIR Certificate of Registration and TIN; 9. Certificate of Registration of Divisoria Plains Homeowners Association, Inc. with HLURB; 10. Approved subdivision plan with preliminary approval & location clearance; and 11. Documentary Stamp Tax Return with Validation Receipt. In reply thereto, please be informed that pursuant to Section 32 of RA No. 7279, pertinent portion of which reads: "Section 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 landowner who sells his property to the Association pursuant to the CMP is exempt from the payment of capital gains tax and from the expanded withholding tax under Revenue Regulations No. 1-90, as amended by Revenue Regulations No. 12-94, as further amended by Revenue Regulations No. 2-98. (BIR Ruling No. 234-92 dated August 27, 1992) In view of the foregoing, the sale of the above-described property in favor of Divisoria Plains Homeowners Association, Inc. is exempt from 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 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 RA No. 7279. aIAHcE However, it is observed that documentary stamp tax is not one of the taxes covered by the tax exemption clause under Sections 20 and 32 of RA No. 7279. Such being the case, the landowner is 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. Furthermore, 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 land titles 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 51-2003. (BIR Ruling No. 147-10 dated December 17, 2010) Notwithstanding the foregoing, the Bureau of Internal Revenue shall conduct verification and post-audit that the actual occupants of the properties transferred under the CMP are qualified beneficiaries and therefore, the sellers are entitled to exemption from the 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 disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue