BIR Ruling No. 222-12

March 29, 2012 BIR RULING NO. 222-12 Sections 20 and 32 of RA No. 7279; BIR Ruling No. 367-2011; BIR Ruling No. 130-2010; BIR Ruling No. 040-2010 Kaisampalad Homeowners Association, Inc. Purok Katilingban, Brgy. Alijis Bacolod City Attention: Edgar O. Marfil President Gentlemen : This refers to your letter dated September 7, 2011 requesting for the exemption from payment of capital gains tax the transfer of title from the landowner to KAISAMPALAD HOMEOWNERS ASSOCIATION, INC. of real property purchased pursuant to Republic Act No. 7279, otherwise known as the "Urban Development Housing Act of 1992". It is represented that KAISAMPALAD HOMEOWNERS ASSOCIATION, INC. with Taxpayer's Identification Number (TIN) 006-772-014, is a homeowner's organization duly registered with the Housing and Land Use Regulation Board (HLURB) with Certificate of Registration No. 11273 dated August 1, 2007 while KAISAMPALAD, INC. with TIN 004-839-149, a domestic corporation, is the registered owner of a parcel of land identified as Lot 890-A-1-A located at Barangay Alijis, Bacolod City containing an area of three thousand (3,000) square meters, more or less, and covered by Transfer Certificate of Title (TCT) No. 293385 issued by the Register of Deeds of Bacolod City. Pursuant to Republic Act No. 7279, otherwise known as the "Urban Development Housing Act of 1992", KAISAMPALAD HOMEOWNERS ASSOCIATION, INC., secured a housing loan under the Community Mortgage Program (CMP), a financing assistance program of the Social Housing Finance Corporation (SHFC), a subsidiary of the National Home Mortgage Finance Corporation (NHMFC), for the acquisition of the subject parcel of land that its qualified member-beneficiaries shall occupy. SHFC executed a Letter-Guarantee LOG No. 0706 dated June 30, 2011 in favor of KAISAMPALAD, INC. undertaking to pay the amount of Two Million Nine Hundred Thirty Seven Thousand Eight Hundred Seventy Two Pesos and 34/100 (PhP2,937,872.34) in the name of KAISAMPALAD HOMEOWNERS ASSOCIATION, INC. aHcACI The names of the qualified member-beneficiaries, lot allocation and share in road lot & open space are as follows: Lot Allocation Name of Members Blk. Lot Home Share in Total No. No. Lot Road Lot Area Area & Open Space 1 Batchiller, Isagani L. 1 1 53.00 7.41 60.41 2 Pahayahay, Angeline G. 1 2 47.00 6.57 53.57 3 Pahayhay, Zaldy R. 2 1 56.00 7.83 63.83 4 Verona, Rey Eduard C. 2 2 48.00 6.71 54.71 5 Baladhay, Josephine G. 2 3 26.00 3.64 29.64 6 Estares, Jonard E. 2 4 33.00 4.61 37.61 7 Llanes, Renato M. 2 5 60.00 8.39 68.39 8 Lucasan, Richelle V. 2 6 18.00 2.52 20.52 9 Blancia, Margarito Jr., A. 3 1 33.00 4.61 37.61 10 Puyong, Roberto G. 3 2 29.00 4.05 33.05 11 Canillada, Rodolfo A. 3 3 36.00 5.03 41.03 12 Villaro, Lorna A. 3 4 48.00 6.71 54.71 13 Dador, Marilou J. 3 5 26.00 3.64 29.64 14 Catenoy, Ma. Marisa 3 6 71.00 9.93 80.93 15 Villaro, Arnel V. 3 7 59.00 8.25 67.25 16 Butantan, Gary C. 3 8 72.00 10.07 82.07 17 Blancia, Remegio A. 3 9 68.00 9.51 77.51 18 Calanza, John P. 3 10 78.00 10.91 88.91 19 Tupas, Lourdes L. 3 11 18.00 2.52 20.52 20 Arevalo, Evelyn Y. 3 12 17.00 2.38 19.38 21 Navia, Arthur G., Jr. 3 13 56.00 7.83 63.83 22 Ramos, Nimfa A. 3 14 39.00 5.45 44.45 23 Sangyanon, Oscar S. 3 15 57.00 7.97 64.97 24 Villaceran, Elizabeth N. 3 16 57.00 7.97 64.97 25 Navia, Josephine G. 3 17 90.00 12.58 102.58 26 Espaola, Fernando 3 18 56.00 7.83 63.83 27 Espaola, Romeo B. 3 19 63.00 8.81 71.81 28 Espolong, Jovelyn D. 3 20 78.00 10.91 88.91 29 Tiro, Arlene T. 3 21 80.00 11.19 91.19 30 Jamandre, Josephine P. 3 22 27.00 3.78 30.78 31 Lumogdang, Romeo H. 3 23 46.00 6.43 52.43 32 Alba, Ma. Sylvia B. 3 24 33.00 4.61 37.61 33 Bautista, Norma B. 3 25 46.00 6.43 52.43 34 Negre, Eddie T. 3 26 65.00 9.09 74.09 TOTAL 1,689.00 236.15 1,925.15 ======= ====== ======= A Deed of Sale dated September 6, 2011 was executed between KAISAMPALAD, INC. and KAISAMPALAD HOMEOWNERS ASSOCIATION, INC. for the transfer of the subject parcel of land at an agreed price of Three Million Pesos (PhP3,000,000.00) and that of the PhP3,000,000.00 purchase price, Php2,937,872.34 was paid by SHFC and the difference of PhP62,127.66, in the form of equity, had been paid by the vendee, KAISAMPALAD HOMEOWNERS ASSOCIATION, INC. The Office of the Sangguniang Panlungsod, City of Bacolod, issued Resolution No. 647 Series of 2011 approving the application for Preliminary Approval and Location Clearance of KAISAMPALAD, INC. In reply, please be informed that pursuant to Sections 20 and 32 of Republic Act (RA) No. 7279, pertinent portions of which state that: "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: xxx xxx xxx (2) Capital gains tax on raw lands used for the project; xxx xxx xxx." "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 of the aforestated property by KAISAMPALAD, INC. to KAISAMPALAD HOMEOWNERS ASSOCIATION, INC. is exempt from the capital gains tax. Upon issuance of this letter of exemption, and upon registration of the documents of sale, a lien on the Certificate of Title of the land to be issued in the name of the KAISAMPALAD HOMEOWNERS ASSOCIATION, INC. 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 R.A. No. 7279. AaHcIT However, the documentary stamp tax is not one of the taxes covered by the tax exemption clause in Sec. 20 of RA 7279. Accordingly, KAISAMPALAD, INC. is liable to pay the documentary stamp tax on the documents 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 KAISAMPALAD HOMEOWNERS ASSOCIATION, INC. 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. 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. (BIR Ruling No. 367-2011 dated October 5, 2011; BIR Ruling No. 130-2010 dated December 12, 2010; and BIR Ruling No. 040-2010 dated August 27, 2010) 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