Exemption from Payment of All Taxes and Charges Relative to the Transfer of Title

November 14, 1989 BIR RULING NO. 228-89 24 196 000-00 228-89 S i r : This refers to the Memorandum of Agreement entered into between and among: the Department of Public Works and Highways (DPWH), the Department of Environment and Natural Resources (DENR), the Department of Finance (DOF), the Home Insurance Guaranty Corporation (HIGC), the National Government Center Housing Committee (NGCHC) and the Housing and Urban Development Coordinating Council (HUDCC) relative to Proclamation No. 137 dated August 11, 1987 which segregated 150 hectares of the National Government Center (NGC) site located in Quezon City for development into a social housing community and for disposition by way of direct sale to the bonafide residents therein; that it is imperative to expedite such development and disposition in order to accelerate the implementation of urban land reform as mandated by Memorandum Order No. 15, issued on January 27, 1988; that to expedite such development and disposition, there exists an urgent need to transfer various resubdivided titles to the 150 hectares of land allocated for the said project, to another government agency possessing not only a clear mandate to own, hold, deal and develop real properties but also the required expertise in undertaking the same, and which is highly acceptable to the residents therein which has been identified to be the HIGC in order to facilitate development and disposition of the National Government Center site; that as a key government housing agency possessing power under R.A. No. 580 as amended and Executive Order No. 535 to own real estate and to mortgage, sell and dispose the same, the HIGC shall be tasked to assume possession, custody and ownership and accept legal turnover by DPWH/DENR of land administration of subject real property for development and disposition into a social housing community. It appears also that HIGC shall sell the developed lots to qualified beneficiaries at an affordable price which shall recover the cost of development and acquisition cost by the government of the rawlands; and upon completion of the disposition and sale coupled with recovery of development costs and original acquisition cost, HIGC shall hold the funds on instruction of HUDCC for use in other similar housing projects for the urban poor. cdtech In connection therewith, an exemption from payment of all taxes and charges relative to the transfer of title from the DENR to HIGC and from HIGC to the qualified beneficiaries of the National Government Center Housing Project is requested from this Office. In reply thereto, please be informed that the participation of DPWH to the agreement i.e. to endorse to DENR individual titles to the properties within the 150 hectares NGC site which is presently in its possession in accordance with Act No. 3038 in relation to the provisions of the Public Land Act as amended and for DENR to convey, transfer and assign in favor of HIGC as the designated shelter agency, the legal title to and possession of the NGC site in order to carry out the mandate of Proclamation No. 137, is not subject to tax considering that the aforesaid 150 hectares NGC site is just being transferred without any consideration to an agency of the government i.e. HIGC to carry out the mandate of Proclamation No. 137 for the development of the NGC into a social housing community in order to accelerate the implementation of the urban land reform program. Moreover, the transfer of the title to the property by HIGC to the qualified beneficiaries is not subject to the capital gains tax since under Section 21(e) of the Tax Code, as amended, only individuals, including estates and trusts shall be taxed on the capital gains presumed to have been realized from the sale, exchange or other disposition of real properties located in the Philippines. Likewise, if the price to be paid by qualified beneficiaries merely represent development costs and original acquisition cost, HIGC shall not be subject to tax on the sale transaction. However, if HIGC shall realize any gain, since HIGC's charter does not provide for any tax exemption, such gain shall be subject to income tax under Section 24 of the Tax Code, as amended. Furthermore, the Deed of Assignment executed by DPWH to DENR as well as the Deed of Assignment executed by DENR to HIGC of the titles covering the said properties are not subject to documentary stamp tax since the documents do not contain any consideration for said assignments. However, the Deed of Sale and Conveyance of the developed lots from HIGC to the qualified beneficiaries is subject to the documentary stamp tax under Section 196 of the Tax Code, as amended. cdta Very truly yours, (SGD.) VICTOR A. DEOFERIO, JR. Deputy Commissioner