BIR Ruling No. 236-14

June 25, 2014 BIR RULING NO. 236-14 RA 7279; 000-00 Housing and Resettlement Division Rizal Provincial Government Ynares Center Complex, San Roque, Antipolo, Rizal Attention: Loel M. Malonzo OIC-H.A.R.D. Gentlemen : This refers to your letter dated April 4, 2013 duly referred by Housing and Urban Development Coordinating Council (HUDCC) with DTS. No. A2-12-493, requesting Capital Gains Tax exemption for your land acquisition projects for housing under Direct Buying Scheme. It is represented that your Office is a social service division catering on land acquisition for the security of land tenure of informal settlers within the Province of Rizal; that you are an accredited mobilizer for the Community Mortgage Program (CMP) of the Social Housing Finance Corporation (SHFC) and utilizing Direct Buying Scheme with the landowners; and that you are aware that whenever the land acquisition/housing projects are under the National Housing Authority (NHA) and the CMP of SHFC are exempt from Capital Gains Tax. In your letter, you request for Capital Gains Tax exemption on the land acquisition projects for housing under Direct Buying Scheme. In reply, please be informed that Sections 19, 20 and 32 of Republic Act (RA) No. 7279, otherwise known as the Urban Development and Housing Act of 1992 provides as follows: "Sec. 19. Incentives for the National Housing Authority. The National Housing Authority, being the primary government agency in charge of providing housing for the underprivileged and homeless, shall be exempted from the payment of all fees and charges of any kind, whether local or national, such as income and realty taxes. All documents or contracts executed by and in favor of the National Housing Authority shall also be exempt front the payment of documentary stamp tax and registration fees, including fees required for the issuance of transfer certificates of title." aAHISE "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 sectors: 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) Property sold under the CMP shall be exempted from the capital gains tax; and xxx xxx xxx Moreover, Section 31 of RA No. 7279 defines that Community Mortgage Program (CMP) is a mortgage financing program of the National Home Mortgage Finance Corporation which assists legally organized associations of underprivileged and homeless citizens to purchase and develop a tract of land under the concept of community ownership. The Direct Buying Scheme is not among those transactions that are entitled to the tax incentives under RA No. 7279. Since it is not covered by RA No. 7279, the transaction shall be treated as ordinary transfer of real property that is subject to applicable taxes. IEcaHS It should be remembered that laws and statutes granting tax exemptions are strictly construed against the taxpayer. Exemptions are never presumed and the burden is upon the taxpayer to establish his right to exemption beyond reasonable doubt. 1 In the case of Mactan Cebu International Airport Authority v. Marcos , 2 the Supreme Court held: "Accordingly, tax statutes must be construed strictly against the government and liberally in favor of the taxpayer. But since taxes are what we pay for civilized society, or are the lifeblood of the nation, the law frowns against exemptions from taxation and statutes granting the exemptions are thus construed strictissimi juris against the taxpayer and liberally in favor of the taxing authority. A claim of exemption from tax payments must be clearly shown and based on language in the law too plain to be mistaken. Elsewise stated, taxation is the rule, exemption therefrom is the exception." In view of the foregoing, this Office regrets to deny your request for exemption from capital gains tax for lack of legal basis. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue Footnotes 1. Dimaampao, Japar B., Tax Principles and Remedies, Second Edition (2005). 2. G.R. No. 120082, 11 September 1996, 261 SCRA 667.