BIR Ruling No. 242-14

June 25, 2014 BIR RULING NO. 242-14 RA 7279; BIR Ruling No. 341-13; BIR Ruling No. 640-12 Kar Asia Homeowners' Association, Inc. Purok 25 Teachers' Village Calinan, Davao City Attention: Mr. Serafin A. Camerino, Jr. President Gentlemen : This refers to your letter dated October 1, 2010, requesting in effect, for a ruling that the sale of a parcel of land by Kar Asia, Inc. to Kar Asia Homeowners' Association, Inc. (KAHOA) is exempt from the payment of capital gains tax pursuant to Republic Act (RA) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". It appears that Kar Asia, Inc. (TIN 000-075-589) is the registered owner of a lot covered by Transfer Certificate of Title (TCT) No. T-365319 of the Registry of Deeds for Davao City. The aforesaid property is situated at Barangay Calinan, Davao City with an area of 14,000 sq.m. On the other hand, KAHOA (TIN 006-047-995) is a legal association of underprivileged and homeless citizens registered with the Housing and Land Use Regulatory Board (HLURB) under Certificate of Registration No. 01201 dated March 28, 2003. On February 3, 2010 the above-stated parties executed a Deed of Absolute Sale whereby the owner transfers and conveys to KAHOA a fraction of the above-quoted property corresponding to 13,800 sq.m., more or less, with 13,592.93 sq.m. under the Community Mortgage Program (CMP) of the Social Housing Finance Corporation (SHFC) at an agreed price of P3,806,020.40 and an excluded portion of 207.07 sq.m. as direct purchase and another part of 200 sq.m. donated by Kar Asia, Inc. to KAHOA. For and in consideration of the sum of P3,742,367.72 paid by SHFC from the vendee to the entire satisfaction of the vendor and the difference of P63,652.68, in a form of equity which was already paid by the vendee, the former thereby cedes the above-described property to the latter and shall be proportionately distributed to the association's qualified beneficiaries. SEcITC In support of its request, Kar Asia Homeowners' Association, Inc. has completely submitted on October 18, 2013 the following documents: 1. Letter application for tax exemption; 2. Certified true copy of the Masterlist of Qualified Beneficiaries duly certified by the SHFC Davao Office; 3. Duplicate original copy of the Deed of Absolute Sale from Kar Asia, Inc. to KAHOA; 4. Certified true copy of the Certification from the President of SHFC that the subject property qualifies and is actually a CMP Project; 5. Certified true copy of the Articles of Incorporation of KAHOA; 6. Certified true copy of the TCT and latest Tax declaration of the property sold to the community association; 7. Copy of the Site Development Plan of the lot sold to the community association; 8. TIN ID of the seller/landowner and BIR Certificate of Registration of KAHOA; and 9. Other pertinent documents. In reply, please be informed that pursuant to Sections 20 and 32 of 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: (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: ACDIcS xxx xxx xxx (b) Properties sold under the CMP shall be exempted from the capital gains tax; and" xxx xxx xxx the landowner who sold its property for use in a socialized housing project is exempt from the payment of capital gains tax. Such being the case, the sale by Kar Asia, Inc. to KAHOA of the 13,592.93 sq.m. portion of the property covered by TCT No. T-365319 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 beneficiary association 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 RA No. 7279. (BIR Ruling No. 109-13 dated March 21, 2013) However, the documentary stamp tax is not one of the taxes covered by the tax exemption clause in Sec. 20 of RA 7279. Accordingly, KAHOA 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 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. 109-13 dated March 21, 2013) 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 seller is entitled to exemption from capital gains tax or income tax imposed under the Tax Code of 1997. ATHCDa The Master List of member-beneficiaries hereto appended, consisting of one-hundred twenty six (126) qualified individuals, (124 CMP beneficiaries and 2 member beneficiaries by direct purchase), as well as their corresponding lot allocations and area (in sq.m.) occupied by each of them shall form part of this Ruling. 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 ATTACHMENT Master List of Qualified Beneficiaries of Kar Asia Homeowners' Association, Inc. Lot Allocation Name Blk Lot Total No. No. (sq.m.) 1 Labacar, Albert P., Sr. 1 1 127.74 2 Dayanan, Minda Luz C. 1 2 64.54 3 Monciller, Rachel G. 1 3 190.94 4 Esto, Cherlita B. 1 4 82.02 5 Lanoy, Francis Eric R. 1 5 122.36 6 Onilongo, Allemn I. 1 6 221.86 7 Buenavesta, Noel R. 1 7 130.43 8 Cordova, Custodio G. 1 8 146.57 9 Esto, Elsa B. 1 9 250.10 10 Sortes, Damiano C. 1 10 134.46 11 Yazima, Estrella A. 1 11 143.88 12 Divinagracia, Jocelyn B. 1 12 143.88 13 Mata, Vilma L. 1 13 92.78 14 Lauresta, Lorna U. 1 14 154.63 15 Dinque, Rufino F. 1 15 96.81 16 Panday, Ronald P. 1 16 84.71 17 Calvis, Eutemio D. 1 17 123.71 18 Gaetos, Ryan Anthony S. 1 18 176.15 19 Fortugaliza, Mervin R. 1 19 direct purchase 20 Pantojan, Roger P. 1 20 direct purchase 21 Ambit, Marilou M. 2 1 92.78 22 Dinque, Hermocillo F. 2 2 76.64 23 Origenes, Tita A. 2 3 336.16 24 Reyes Delos, Judith C. 2 4 106.23 25 Perez, Fe A. 2 5 260.86 26 Rico, Zenaida B. 3 1 108.92 27 Esto, Aniceto B. 3 2 59.16 28 Parella, Benedicto A. 3 3 212.45 29 Salang, Joeriz T. 4 1 193.63 30 Gayda, Arlene S. 4 2 71.27 31 Masamayor, Gerry Q. 4 3 110.26 32 Agravante, Ariel Q. 4 4 139.84 33 Reston, Conchita M. 4 5 344.23 34 Sibalda, Nancy P. 4 6 223.21 35 Uba, Angeline D. 4 7 158.67 36 Doloroso, Johnny J. 4 8 219.18 37 Manlapaz, Jonna Liza M. 4 9 160.01 38 Galay, Amie B. 4 10 63.20 39 Sarsale, Arnel M. 4 11 63.20 40 Lico, Danilo D. 4 12 65.89 41 Jangco, Casiano D. 4 13 225.90 42 Jangco, Alberto D. 5 1 184.22 43 Espinosa, Arnold S. 5 2 83.37 44 Quintanilla, Mario B. 5 3 293.13 45 Gasing, Sarah Jane M. 5 4 84.71 46 Espinosa, Rosita S. 5 5 79.33 47 Noro, Eulogio B. 5 6 64.54 48 Camerino, Bernandita E. 5 7 108.92 49 Panday, Ramon A. 5 8 64.54 50 Butaya, Cesar B. 5 9 75.30 51 Caete, Arlene M. 5 10 79.33 52 Robillo, Joel U. 5 11 149.25 53 Entero, Lourdes R. 5 12 82.02 54 Cali, Thelma S. 5 13 53.79 55 Maglasang, Annabelle B. 5 14 65.89 56 Ibabao, Juanita D. 5 15 56.47 57 Dungog, Luz O. 5 16 59.16 58 Paredes, Teresita P. 5 17 63.20 59 Ruben, Dioscoro P. 5 18 77.99 60 Balbuena, Anie P. 5 19 83.37 61 Araas, Julia F. 5 20 111.60 62 Abellana, Lea E. 6 1 55.13 63 Aclon, Orlando S. 6 2 64.54 64 Baltazar, Fe D. 6 3 52.44 65 Bayon-On, Estela C. 6 4 57.82 66 Lascua, Josefina R. 6 5 61.85 67 Olbes, Feliciano Q. 6 6 63.20 68 Nuez, Manuel M. 6 7 63.20 69 Bernaldez, Jovito S. Jr. 6 8 116.98 70 Lofranco, Richard C. 6 9 51.10 71 Bedania, Wilfredo J. 6 10 64.54 72 Boquil, Elmer P. 6 11 99.50 73 Lendio, Ellen T. 6 12 134.46 74 Cavite, Anita R. 7 1 131.77 75 Amores, Ronald T. 7 2 67.23 76 Libre, Alfonso B. 7 3 48.41 77 Abon, Dumelario N. 7 4 56.47 78 Bocoya, Janeth O. 7 5 65.89 79 Catao, Genalyn 7 6 86.06 80 Casinillo, Gina 7 7 57.82 81 Catao, Josephine S. 7 8 112.95 82 Catao, Cesar L. 7 9 68.58 83 Saldon, Angela M. 7 10 98.16 84 Castillo, Manolito, H. 7 11 106.23 85 Pradilla, Merlyn A. 7 12 69.92 86 Momo, Roberto A. 7 13 80.68 87 Lampano, Carmelita M. 7 14 59.16 88 Canatoy, Melchora H. 7 15 71.27 89 Teopez, Jonathan L. 7 16 43.03 90 Mellona, Rodrigo C. 7 17 67.23 91 Aperocho, Mary Joy E. 7 18 118.33 92 Saldon, Emily C. 7 19 65.89 93 Saldon, Amorena D. 7 20 67.23 94 Ewayan, Marivic M. 7 21 59.16 95 Cuming, Jay Ann M. 7 22 64.54 96 Bernaldez, Carlito A. 7 23 69.92 97 Calvis, Juanito S. 7 24 64.54 98 Torres, Archie P. 7 25 103.54 99 Aperocho, Maricel E. 7 26 116.98 100 Tulang, Eutiqui C. 8 1 135.81 101 Borres, Arseneo S. 8 2 137.15 102 Belmonte, Danilo C. 8 3 90.09 103 Deimos, Angelita Y. 8 4 166.73 104 Camerino, Serafin A. Jr. 8 5 181.53 105 Calvis, Jesse S. 8 6 75.30 106 Jangco, Madilyn C. 8 7 69.92 107 Serano, Chona Q. 9 1 16.14 108 Blanco, Nelia M. 9 2 10.76 109 Solotan, Rolando A. 9 3 41.68 110 Bernaldez, Diosdado G. 9 4 63.20 111 Montajes, Corazon G. 9 5 64.54 112 Codera, Cecilio M. 9 6 82.02 113 Tabaosares, Cherry 9 7 84.71 114 Gofredo, Felonila S. 10 1 116.98 115 Flores, Gadiel A. 10 2 396.67 116 Daplin, James Paul R. 10 3 154.63 117 Lauron, Rosalyn G. 10 4 75.30 118 Gubalane, Relwin R. 10 5 75.30 119 Paler, Robert B. 10 6 77.99 120 Flores, Nerio A. 10 7 75.30 121 Onilongo, Isidro L. 10 8 72.61 122 Dalipe, Eleanor M. 10 9 72.61 123 Rodriguez, Geraldine B. 10 10 151.94 124 Rodriguez, Concepcion L. 10 11 150.60 125 Villanueva, Andrea C. 11 1 150.60 126 Caminos, Melchor F. 12 1 116.98 Grand Total 13,512.25 ========