Villa Sta. Cruz Homeowners Association, Inc.

May 24, 2016 BIR RULING NO. 214-16 Sec. 32, RA No. 7279; BIR Ruling No. 053-15 Villa Sta. Cruz Homeowners Association, Inc. Sitio Pang-pang, Brgy. San Isidro, Talisay City Attention: Bendebel Lapiz President Gentlemen : This refers to the letter of Ma. Ana R. Oliveros, President of the Social Housing Finance Corporation (SHFC) dated February 10, 2016, endorsing the sale transaction between Talisay City Government and Villa Sta. Cruz 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 Talisay City Government (hereinafter referred to as Landowner) is the registered owner of two (2) parcels of land covered by two (2) Transfer Certificates of Title (TCT): TCT No. Tax Declaration No. Lot No. Area (sq.m.) T-155233 06001801549 2308 2,026 T-155234 06001801550 2309 1,838 total area 3,864 ===== both issued by the Registry of Deeds of Province of Cebu. The aforesaid properties are situated at Brgy. San Isidro, Talisay City. Villa Sta. Cruz Homeowners Association, Inc. (TIN 455-637-570-000), on the other hand, is a homeowner's organization duly registered with the Housing and Land Use Regulatory Board (HLURB). On May 19, 2014, the parties executed a Deed of Absolute Sale whereby the Landowner transferred and conveyed Three Thousand Six Hundred Sixty Three and 27/100 square meters (3,663.27 sq.m.) portion of the subject properties to Villa Sta. Cruz Homeowners Association, Inc. at an agreed price of Four Million Sixty One Thousand Nine Hundred Eighty Pesos and 31/100 (P4,061,980.31). Pursuant to the certification issued by SHFC, 3,663.27 sq.m. out of 3,864 sq.m. covered by TCT Nos. T-155233 and T-155234 actually comprise a Community Mortgage Program (CMP) Project and shall be proportionately distributed to the association's qualified member-beneficiaries. 1 For this purpose, Villa Sta. Cruz 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. In support of its request, Villa Sta. Cruz Homeowners Association, Inc. has completely submitted on February 12, 2016 the following documents: 1) SHFC letter application for tax exemption; 2) Certification of the President of the SHFC that 3,663.27 sq.m. portion of the subject properties qualify and is actually a CMP project; CAIHTE 3) SHFC Letter-Guaranty No. LCMP-10; 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 TCTs and Latest Tax Declarations 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 landowner who sold its properties under CMP for use in a socialized housing project are exempt from the payment of capital gains tax. Such being the case, the sale by the landowner, Talisay City Government to Villa Sta. Cruz Homeowners Association, Inc. of the 3,663.27 sq.m. out of 3,864 sq.m. covered by TCT Nos. T-155233 and T-155234 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 Homeowners 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 landowners are 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 actual consideration, since one of the contracting parties is the Government. 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 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 15-2003. (BIR Ruling No. 053-15 dated February 27, 2015) Moreover, under Section 109 (1) (P) of the Tax Code of 1997, as amended by R.A. 9337, the sale of real properties utilized for low-cost and socialized housing as defined by R.A. No. 7279 shall be exempt from value-added tax (VAT), thus, the sale of the 3,663.27 sq.m. out of 3,864 sq.m. covered by TCT Nos. T-155233 and T-155234 by the landowner to Villa Sta. Cruz Homeowners Association, Inc. is exempt from the imposition of VAT. (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 Sec. 27 (D) (5) the Tax Code of 1997, as amended. 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 Villa Sta. Cruz Homeowners Association (VISCHOA) Sitio Pang-Pang, San Isidro, Talisay City, Cebu Footnotes 1. See Annex for the masterlist of qualified beneficiaries consisting of three (3) pages.