BIR Ruling No. 223-13

June 20, 2013 BIR RULING NO. 223-13 RA 7279; BIR Ruling No. 129-12; BIR Ruling No. 413-11 Cascor Land and Housing Corporation 1029 E. Delos Santos Avenue, Quezon City Attention: Edgar G. Coronel President Gentlemen : This refers to your letter dated March 7, 2012, requesting for an exemption from income taxes, capital gains tax/expanded withholding tax and value-added tax (VAT) on the sale of 119 lots/units of GOLDENVILLE RESIDENCES PROJECT particularly detailed as follows: Lots 2-34 Blk. 13, Lots 26-37 Blk. 4, Lots 1-14 Blk. 12, Lots 1-14 Blk. 11, Lots 1-14 Blk .10, Lots 1-8 Blk. 9 & Lots 24-47 Blk. 5, pursuant to the provisions of Republic Act (RA) No. 7279 or the "Urban Development and Housing Act of 1992". AcSHCD It is represented that Cascor Land & Housing Corporation with Tax Identification No. 237-245-030-000 is a domestic corporation duly organized and existing under Philippine laws; that it is registered with the Securities and Exchange Commission (SEC) under Registration No. CS200504542; that it is the owner and developer of a housing project known as Goldenville Residences (270 saleable lots/Psd-03-150166) located at Brgy. Saguin, City of San Fernando, Pampanga; and that the project is duly registered with the Housing and Land Use Regulatory Board under Certificate of Registration No. 15894, with License to Sell No. 15632, covering the additional conditions, to wit: "Socialized units to comply with Sec. 18 of RA 7279 are Lots 2-34 Blk. 13, Lots 26-37 Blk. 4, Lots 1-14 Blk. 12, Lots 1-14 Blk. 11, Lots 1-14 Blk. 10, Lots 1-8 Blk. 9 & Lots 24-47 Blk. 5 (119 lots/units) which are to be sold at a maximum selling price of P300,000 per house and lot package." In reply, please be informed that Section 20 of RA No. 7279, reads: "Sec. 20. Incentives for the 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; "(3) Value-added tax for the project contractor concerned." Only the sale of socialized housing units to qualified beneficiaries shall be exempt from income taxes, and consequently, from creditable expanded withholding tax prescribed under Revenue Regulations (R.R.) No. 2-98, as amended. Thus, a buyer of a socialized housing unit shall be required by the developer/owner/seller to execute a sworn statement that he is eligible as a socialized housing beneficiary provided under Section 5 (A) of R.R. No. 11-97. Section 5 (A) of R.R. No. 11-97 provides that: SEC. 5. Requirements/Conditions for the Availment of Tax Incentives/Exemptions. A. To qualify for socialized housing program, a beneficiary (a) must be a Filipino citizen; (b) must be an underprivileged and homeless citizen, as defined in Section 3(t) of the Act and Section 2(r) of these Regulations; (c) must not own any real property, whether in the urban or rural areas; and (d) must not be a professional squatter or a member of squatting syndicates. In this connection, any sale made by the owner and developer to interested parties other than the principal target beneficiaries under Sections 3 (t) and 16 of R.A. No. 7279, shall not be entitled to the foregoing tax exemption should there be non-compliance with any of the aforestated sine qua non terms and conditions. (BIR Ruling No. 129-12 dated February 23, 2012) AaDSTH It is, however, understood that the Certificate Authorizing Registration (CAR) shall only be issued after it is established upon proper verification by the Revenue District Officer (RDO) concerned that, considering the rules on valuation of real property, the actual selling price per sale transaction of the house and lot packages in this case does not really exceed P400,000.00 and P160,000.00 for lot only. Thus, sale of a house and lot or lot only above the maximum amount shall be subject to the corresponding internal revenue taxes. Nonetheless, it is observed that documentary stamp tax is not one of the taxes covered by the tax exemption clause in Section 20 of RA No. 7279. Such being the case, the owner/project developer/seller shall be liable to pay the documentary stamp tax on the documents conveying the properties imposed under Section 196 of the Tax Code of 1997, as amended, based on the consideration contracted to be paid for such realties or on their fair market value determined in accordance with Section 6 (E) of the said Code, whichever is higher. Pursuant to Section 20 of RA 7279, a project contractor of a socialized housing project shall also be exempt from the payment of value-added tax (VAT) on the project concerned. Relative thereto, Section 4.109-1 (B) (1) (p) (3) of RR No. 16-2005 states that: "Section 4.109-1. VAT-Exempt Transactions. (A) In general. "VAT-exempt transactions" refer to the sale of goods or properties and/or services and the use or lease of properties that is not subject to VAT (output tax) and the seller is not allowed any tax credit of VAT (input tax) on purchases. xxx xxx xxx (B) Exempt transactions. (1) Subject to the provisions of Subsection (2) hereof, the following transactions shall be exempt from VAT: xxx xxx xxx (p) The following sales of real properties are exempt from VAT, namely: xxx xxx xxx (3) Sale of real properties utilized for socialized housing as defined under RA No. 7279, and other related laws, such as RA No. 7835 and RA No. 8763, wherein the price ceiling per unit is P225,000.00 or as may from time to time be determined by the HUDCC and the NEDA and other related laws. . . . ." Furthermore, pursuant to HUDCC Resolution No. 1, Series of 2008, dated December 11, 2008, and as circularized by Revenue Memorandum Circular No. 30-2009, pertinent portion of which reads: "THEREFORE BE IT RESOLVED, AS IT IS HEREBY RESOLVED that the adjustment of the Low Cost Level 1-A socialized housing loan ceiling from P300,000.00 to P400,000.00 be APPROVED, as the same is hereby APPROVED." the newly adjusted price ceiling of P400,000.00 for socialized housing shall apply to sale of real properties utilized for socialized housing, as defined under R.A. No. 7279 otherwise known as "Urban Development and Housing Act", and other related laws such as R.A. No. 7835 otherwise known as the "Comprehensive and Integrated Shelter Financing Act of 1994" and R.A. No. 8763 otherwise known as the "Home Guaranty Act of 2000", beginning January 1, 2009. aSTECI Moreover, Section 2 of Revenue Regulations No. 17-2001 provides; Section 2. Definition of Terms. As used in these Regulations, the following terms shall have the following meaning: xxx xxx xxx "A socialized housing unit shall not exceed P150,000.00 (now P400,000.00) for a house and lot package, subject to periodic adjustment or increase as the Housing and Land Use Regulatory Board (HLURB) may effect from time to time. In the case of sale of homelots only, the price shall not exceed forty percent (40%) of the maximum limit prescribed for the house and lot package. " (Emphasis supplied) The developer of the socialized housing units under RA No. 7279 is exempt from the payment of value-added tax pursuant to the aforecited provision. However, purchases of goods/articles by the project contractor shall be subject to value-added tax, even if the said purchases are to be used for the socialized housing project. Moreover, it shall be understood that it must issue non-VAT official receipts on its gross receipts from the said socialized housing project. Accordingly, sale of the House and Lot or Lot only covered by HLURB License to Sell No. 15632, covering Lots 2-34 Blk. 13, Lots 26-37 Blk. 4, Lots 1-14 Blk. 12, Lots 1-14 Blk. 11, Lots 1-14 Blk. 10, Lots 1-8 Blk. 9 & Lots 24-47 Blk. 5 (119 lots/units) under GOLDENVILLE RESIDENCES PROJECT to qualified beneficiaries should be exempt from income taxes and, consequently, from creditable expanded withholding tax and from VAT pursuant to RA 7279 (wherein the maximum price of the House and Lot is P400,000.00 and P160,000 for Lot only). 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