BIR Ruling No. 243-15

July 10, 2015 BIR RULING NO. 243-15 RA No. 7279; BIR Ruling No. 294-14; BIR Ruling No. 283-14 G.D. Gustilo Homeowners Association, Inc. Purok Pepsi, Zone 4, Barangay Bata, Bacolod City 6100 Attention: Mr. Ramsel S. Lim President Gentlemen : This refers to the letter of Eduardo T. Manicio, Executive Vice President of Social Housing Finance Corporation (SHFC) dated May 28, 2014, endorsing the sale transaction between Daniel Gustilo, Jr., Gerry Gustilo , and G.D. Gustilo Homeowners Association, Inc. for exemption from the payment of Capital Gains Tax and other taxes in accordance with the Republic Act (RA) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". Documents submitted disclose that Daniel Gustilo, Jr. (TIN 429-250-192-000), Gerry Gustilo (TIN 429-330-392-000), are the registered owners (hereinafter referred to as "Landowners") of two (2) parcels of land covered by Transfer Certificates of Title (TCT), to wit: TCT No. Area (sq. m.) Tax Declaration No. T-50272 450 156820 T-50273 450 157085 issued by the Registry of Deeds for Bacolod City. The aforesaid properties are situated at Brgy. Bata, Bacolod City. G.D. Gustilo Homeowners Association, Inc. (TIN 427-592-454-000), on the other hand, is a homeowners' organization registered with the Housing and Land Use Regulatory Board (HLURB) under Certificate of Registration No. 18924. On April 8, 2014, the parties executed a Deed of Absolute Sale whereby the owners transferred and conveyed Nine Hundred square meters (900 sq.m.) to G.D. Gustilo Homeowners Association, Inc. at an amount of One Thousand One Hundred Seventy Nine Pesos (Php1,179.00) per square meter or at a total agreed price of One Million Sixty One Thousand One Hundred Pesos (Php1,061,100.00), Philippine Currency. Pursuant to a Certification issued by SHFC, the Nine Hundred square meters (900 sq.m.) covered by TCT Nos. T-50272 and T-50273 actually comprise a CMP Project and shall be proportionately distributed to the association's twenty one (21) qualified member-beneficiaries (Annex A). For this purpose, G.D. Gustilo Homeowners Association, Inc. secured a housing loan under the CMP, a financing assistance program of the Social Housing Finance Corporation a subsidiary of the National Home Mortgage Finance Corporation (NHMFC). In support of its request, G.D. Gustilo Homeowners Association, Inc. has completely submitted the following documents: ISHCcT 1) Letter application for tax exemption; 2) Certification of the President of the SHFC that the subject property qualifies and is actually a CMP project; 3) Certified true copy of the Letter of Guaranty issued by the SHFC; 4) Certified true copy of the Deed of Absolute Sale to the Community Association; 5) Certified true copy of the Articles of Incorporation of the Community Association; 6) Certified true copy of the Masterlist of Qualified Beneficiaries duly certified by the SHFC; 7) Certified true copies of the TCTs and Latest Tax Declarations of the Properties Sold to the Community Association; 8) Certified true copy of the Location Plan of the Lot Sold to the Community Association; 9) TIN ID/BIR Certificate of Registration of the sellers and the Homeowners Association; 10) BIR Form 2000-OT (Documentary Stamp Tax Return); and 11) Other pertinent documents. In reply, please be informed that pursuant to Section 32 of RA No. 7279, pertinent portions of which state that: "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 by the landowners to G.D. Gustilo Homeowners Association, Inc . of the real properties with an area of Nine Hundred square meters (900 sq.m.) covered by TCT Nos. T-50272 and T-50273, 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 Homeowners Association shall 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. 294-14 dated July 23, 2014) However, the documentary stamp tax is not one of the taxes covered by the tax exemption clause in Sec. 20 of RA 7279. Accordingly, the landowners are 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. (BIR Ruling No. 283-14 dated July 7, 2014) 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 Nos. 294-14 dated July 23, 2014 and 283-14 dated July 7, 2014) Notwithstanding the foregoing, the Bureau of Internal Revenue shall conduct verification and post-audit that the actual occupants of the properties 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. CAacTH 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 ANNEX A G.D. Gustilo Homeowners Association, Inc. Purok Pepsi, Zone 4, Barangay Bata, Bacolod City Master list of Beneficiaries Name of Beneficiary Block No. Lot No. Total Lot Area 1 Talorong, Ronnel C. 1 1 48.80 2 Clanza, Wenrose V. 1 2 54.48 3 Lim, Johnrey V. 1 3 29.51 4 Lim, Ramsel S. 1 4 47.67 5 Lim, Kristyl May V. 1 5 46.53 6 Malanday, Jennifer L. 1 6 47.67 7 Lumawag, Diana R. 1 7 48.80 8 Dairo, Mary Ann C. 1 8 38.59 9 Dairo, Allan Jr. C. 1 9 37.45 10 Perocho, Anna Rose A. 1 10 51.07 11 Perocho, Francisco Jr. A. 1 11 49.94 12 Perocho, Franklin A. 1 12 59.02 13 Divinagracia, Milca B. 1 13 43.13 14 De La Cruz, Richard M. 1 14 38.59 15 Cansiano, Jonalyn S. 1 15 30.64 16 Torib, Olivia B. 1 16 34.05 17 Chavez, Grace B. 1 17 31.78 18 Baclayon, Josephine C. 1 18 27.24 19 Sayson, Ellen Joy A. 1 19 59.02 20 Buhat, Ricky R. 1 20 32.91 21 Todillo, Constancio D. 1 21 43.13 Total: 900.00 ======