BIR Ruling No. 244-15

July 10, 2015 BIR RULING NO. 244-15 RA No. 7279; BIR Ruling No. 109-13; BIR Ruling No. 304-13 Recomville I Homeowners Association, Inc. Phase 3-A Recomville I, Brgy. 170, Deparo, Caloocan City Attention: Dario T. De Paz President Gentlemen : This refers to the letter of Ma. Ana R. Oliveros, President of Social Housing Finance Corporation (SHFC) dated October 29, 2014, endorsing the sale transaction between Inter-Urban Developers, Inc. and Recomville I Homeowners Association, Inc. Phase 3-A 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 Inter-Urban Developers, Inc. (TIN 000-914-278-000) (hereinafter referred to as Landowner) is the registered owner of four (4) parcels of land covered by Transfer Certificates of Title (TCT), to wit: TCT No. Lot No. Tax Declaration No. Area (sq.m.) C-23061 809-New B-1 24-170-00266-R 5,001 C-23062 809-New B-2 24-170-00267-R 1,250 C-23063 809-New B-3 24-170-00268-R 1,250 C-23064 809-New B-4 24-170-00269-R 1,250 total area 8,751 ===== all issued by the Registry of Deeds for the Metro Manila District III. The aforesaid properties are situated at Barrio Road, Brgy. 170, Caloocan City. Recomville I Homeowners Association, Inc. Phase 3-A (TIN: 247-180-294-000), on the other hand, is a homeowner's organization registered with the Housing and Land Use Regulatory Board (HLURB). On June 28, 2013, the parties executed a Deed of Absolute Sale whereby the Landowner transferred and conveyed Four Thousand Six Hundred Fifty Nine square meters (4,659 sq.m.) portion of the subject properties to Recomville I Homeowners Association, Inc. Phase 3-A at an agreed price of Eight Million Six Hundred Nineteen Thousand One Hundred Fifty Pesos (P8,619,150.00) under Community Mortgage Program (CMP) of the SHFC. Pursuant to the certification issued by SHFC, 4,659 sq.m. out of 8,751 sq.m. covered by TCT Nos. C-23061, C-23062, C-23063 and C-23064 actually comprise a CMP Project and shall be proportionately distributed to the association's qualified member-beneficiaries. 1 For this purpose, Recomville I Homeowners Association, Inc. Phase 3-A secured a housing loan under the CMP, a financing assistance program of the SHFC, a subsidiary of the National Home Mortgage Finance Corporation (NHMFC). Documentary Stamp Tax (DST) due on the sale has been paid. IAETDc In support of its request, Recomville I Homeowners Association, Inc. Phase 3-A has completely submitted on November 7, 2014 the following documents: 1) SHFC letter application for tax exemption; 2) Certification of the President of the SHFC that the subject properties actually comprise a CMP project; 3) Certified true copy of the Letter-Guaranty; 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 TCT and Latest Tax Declaration 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 seller and the Homeowner Association; and 10) 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 landowner to Recomville I Homeowners Association, Inc. Phase 3-A of the 4,659 sq.m. out of 8,751 sq.m. covered by TCT Nos. C-23061, T C-23062, C-23063 and C-23064 is exempt from the capital gains tax. CTIEac Upon issuance of this letter of exemption, and upon registration of the document of sale, a lien on the Certificates 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 properties, to the effect that the said properties 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, the landowner is liable to pay the documentary stamp tax on the documents conveying the afore-stated properties imposed under Section 196 of the Tax Code of 1997, based on the consideration contracted to be paid for such reality or its fair market value determined in accordance with Section 6 (E) of the said Code, whichever is higher. (BIR Ruling No. 109-13 dated March 21, 2013) Moreover, under Section 109 (1) (P) of the Tax Code of 1997, as amended by R.A. 9337, the sale of real properties utilized for low-cost and socialized housing as defined by R.A. No. 7279 shall be exempt from value-added tax (VAT), thus, the sale of the 4,659 sq.m. out of 8,751 sq.m. covered by TCT Nos. C-23061, T C-23062, C-23063 and C-23064 by the landowner to Recomville I Homeowners Association, Inc. Phase 3-A is exempt from the imposition of VAT. (BIR Ruling No. 304-2013 dated August 6, 2013) 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 titles 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. 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 Recomville I Homeowners Association, Inc. Phase 3-A Recomville I, Brgy. 170, Deparo, Caloocan City Name of Beneficiary Blk. Lot Total Area No. No. (sq.m.) 1 Bautista Ma. Victoria O. 41 1 37.09395 2 Magbanua Danilo C. 2 37.09395 3 Peralta Armando Y. 3 37.09395 4 Bautista Felix Jr. O. 4 37.09395 5 Valenzuela Romeo P. 5 37.09395 6 Corsiga Leonibie S. 6 37.09395 7 Siwa Nerissa C. 7 37.09395 8 Borbon Jina R. 8 37.09395 9 Buasan Arnold V. 9 37.09395 10 Fortes Ruben B. 10 37.09395 11 Soriano Quirico B. 11 37.09395 12 Buena Loida A. 12 37.09395 13 Adoray Jovito C. 13 37.09395 14 Tabao Enrique C. 14 37.09395 15 Abante Eleonor C. 15 37.09395 16 Aquino Macaria B. 16 37.09395 17 Capellan, Melrose D. 17 37.09395 18 Taguinod Paulina B. 18 37.09395 19 Benaldo Cesar M. 19 34.12643 20 Solo Romeo C. 20 32.64268 21 Lopez Pinky P. 42 1 37.09395 22 Sancha Ramir S. 2 38.57771 23 Sancha Noriel S. 3 37.09395 24 Sornido Raymundo G. 44 1 51.93153 25 Benmugas Severino G. 2 37.09395 26 Balindan Jose Sonny B. 3 37.09395 27 Pili Rhodora O. 4 37.09395 28 Balindan Gina B. 5 37.09395 29 Lopez Lenard P. 6 37.09395 30 Velacse Violito P. 7 37.09395 31 Otucan Evelyn V. 8 37.09395 32 Ampatin Ma. Rosario T. 9 37.09395 33 Custan Jovelyn R. 10 37.09395 34 Redubla Roland R. 11 43.02898 35 Obillo Evelyn Q. 12 41.54522 36 Gonzales Marlyn G. 13 41.54522 37 Antonio Mary Grace G. 45 1 51.93153 38 Lyson Susan V. 2 37.09395 39 Malindo Pedro II E. 3 37.09395 40 Lyson Sheryl V. 4 37.09395 41 Sibillo Eduardo Jr. L. 5 37.09395 42 Malik Sanla A. 6 37.09395 43 Sibillo Nenita L. 7 37.09395 44 Delos Reyes Reynaldo V. 8 37.09395 45 Olacao Maria Shiela Joy C. 9 37.09395 46 Norcio Norina D. 10 37.09395 47 Estorpe Joseph C. 11 37.09395 48 Buenaventura Sonia B. 12 37.09395 49 Villanueva Jose Sonny P. 13 37.09395 50 Indenible Leonilo G. 14 37.09395 51 Ruiz Hamed B. 15 37.09395 52 Jusay Presilla P. 16 37.09395 53 Buela Danreb N. 17 37.09395 54 Ahig Verna P. 18 37.09395 55 Balute Shovelyn B. 19 53.41529 56 Ravina Crisanta B. 20 51.93153 57 Advincula Analene V. 46 1 51.93153 58 Correo Charles D. 2 37.09395 59 De Guzman Aurelia D. 3 37.09395 60 Anos Rowena J. 4 37.09395 61 Nacalaban Rey D. 5 37.09395 62 Olid Maribeth F. 6 37.09395 63 Fabie Danilo E. 7 37.09395 64 Albos Ramy F. 8 37.09395 65 Ariola Ma. Ana R. 9 37.09395 66 Albos Julita F. 10 37.09395 67 Ymata Lydia S. 11 37.09395 68 Mahinay Christine Joyce 12 37.09395 69 Emata Edgardo O. 13 37.09395 70 Jinang Wenceslao M. 14 37.09395 71 Rivero Kimuel S. 15 37.09395 72 Boctuan Zosimo Jr L. 16 37.09395 73 Sagum Victor C. 17 37.09395 74 Jusay Janice E. 18 37.09395 75 Tortoles Arturo H. 19 37.09395 76 Jusay Daniel E. 20 37.09395 77 Roma Lucena E. 21 37.09395 78 Martin Reynaldo D. 22 37.09395 79 Rabago Roniel T. 23 37.09395 80 Retirado Flora R. 24 37.09395 81 Panganiban Monica Anna L. 25 37.09395 82 Sarting Salve P. 26 37.09395 83 Sancha Nilo Jr. G. 27 43.02898 84 Dela Torre Ronnie T. 28 44.51274 85 Redubla Rodel D. 47 1 51.93153 86 Quizon Anthony G. 2 37.09395 87 Depalco Delia F. 3 37.09395 88 Quizon Artemio Jr. G. 4 37.09395 89 De Guzman Roderick D. 5 37.09395 90 De Guzman Liberty S. 6 37.09395 91 Dagaas Geraldine L. 7 37.09395 92 Lopez Charlita L. 8 37.09395 93 Abella Joel T. 9 37.09395 94 Gonda Jovita N. 10 37.09395 95 Dagaas Virgilio M. 11 37.09395 96 Boctuan Rosalinda M. 12 37.09395 97 Jusay Elmer P. 13 37.09395 98 Manos Marilyn F. 14 37.09395 99 Obillo Jeffrey E. 15 37.09395 100 Robles Jerry M. 16 37.09395 101 Medica Visitacion S. 17 37.09395 102 Danay Diomedes M. 18 37.09395 103 Pacete Theresa D. 21 37.09395 104 Collano Adolfo F. 22 37.09395 105 Ampuan Elioly A. 23 37.09395 106 Guevarra Nancy O. 24 37.09395 107 Delos Santos Vilma G. 25 37.09395 108 Boac Lydia B. 26 37.09395 109 Paghubasan Rodolfo P. 27 37.09395 110 Guerrero Michael F. 28 37.09395 111 Cadungog Zenaida P. 29 37.09395 112 Cubero II Crispin Ian D. 30 37.09395 113 Salazar Ignacio Sr. L. 31 37.09395 114 Dela Torre Elias G. 32 37.09395 115 Obtial Linda A. 33 37.09395 116 Tabaranza Sammy D. 34 37.09395 117 Tamo Antonio A. 35 37.09395 118 Abas Russiel A. 36 37.09395 119 Besmonte Maritess R. 37 37.09395 120 Abas Marilou A. 38 37.09395 121 Depaz Dario T. 39 47.48025 122 Mendoza Wilson N. 40 47.48025 Footnotes 1. See Annex for the masterlist of qualified beneficiaries.