BIR Ruling No. 246-14

June 30, 2014 BIR RULING NO. 246-14 RA No. 7279; BIR Ruling No. 109-13 Imelda Cabaguio Jereza Homeowners Association, Inc. Park Avenue, Purok SOS, Brgy. W. Aquino Agdao, Davao City Attention: Doris B. Quintano President Gentlemen : This refers to the letter of Ma. Ana R. Oliveros, President of Social Housing Finance Corporation (SHFC) dated January 20, 2014, endorsing the sale transaction between Asuncion Jereza Samonte, et al., and Imelda Cabaguio Jereza 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 the following are the registered owners of a parcel of land, identified as Lot 1-A of the subdivision Plan (LRC) PSD-51585, being a portion of Lot 1, Block 11 described on Plan PSD-70666, LRC Rec. No. 15086 covered by Transfer Certificate of Title (TCT) No. 146-2012005020 issued by the Registry of Deeds for Davao City, to wit: Landowners Tax Identification Number Asuncion Jereza Samonte 207-086-200-000 Ma. Purisima E. Jereza 148-083-485-000 Mary Julpha Patricia Jereza-Austria 195-456-920-000 Rustico Jose Enriquez Jereza III 241-114-902-000 Imelda Ma. Elena Enriquez Jereza 230-416-225-000 Mary Anne Margaret Jereza-Ganotan 147-750-175-000 Jose Raul Enriquez Jereza IV 163-012-474-000 Josaine Marie Domingo Bunag 109-936-739-000 Anthony Joseph Jereza Domingo 121-899-402-000 Ana Meinulfa Jereza Domingo 154-120-735-000 Ramon Jesus Jereza Domingo 214-719-714-000 The aforesaid property is situated at Brgy. Wilfredo Aquino, Agdao, Davao City with an area of Eight Thousand Six Hundred Thirty square meters (8,630 sq.m.), more or less. Imelda Cabaguio Jereza Homeowners Association, Inc. (TIN 402-441-060-000), on the other hand, is a homeowner's organization duly registered with the Housing and Land Use Regulatory Board (HLURB). On August 24, 2013, the parties executed a Deed of Absolute Sale whereby the Landowners transferred and conveyed Eight Thousand Three Hundred Ninety Four and 30/100 square meters (8,394.30 sq.m.) portion of the subject property to Imelda Cabaguio Jereza Homeowners Association, Inc. at an agreed price of One Thousand Pesos (P1,000.00) per square meter or a total of Eight Million Three Hundred Ninety Four Thousand Three Hundred Pesos (P8,394,300.00). Pursuant to the certification issued by SHFC, Eight Thousand Three Hundred Ninety Four and 30/100 square meters (8,394.30 sq.m.) out of Eight Thousand Six Hundred Thirty square meters (8,630 sq.m.) covered by TCT No. 146-2012005020 actually comprise a Community Mortgage Program (CMP) Project and shall be proportionately distributed to the association's qualified member-beneficiaries. For this purpose, Imelda Cabaguio Jereza Homeowners Association, Inc. 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 on January 9, 2014. HESAIT In support of its request, Imelda Cabaguio Jereza Homeowners Association, Inc. has completely submitted on March 14, 2014 the following documents: 1) SHFC 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-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 Property 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 landowners to Imelda Cabaguio Jereza Homeowners Association, Inc. of Eight Thousand Three Hundred Ninety Four and 30/100 square meters (8,394.30 sq.m.) portion of the property covered by TCT No. 146-2012005020 is exempt from the capital gains tax. HDATSI 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. 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 landowners are liable to pay the documentary stamp tax on the document 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. 109-13 dated March 21, 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 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. 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 Imelda Cabaguio Jereza Homeowners Association, Inc. Park Avenue, Purok SOS, Brgy. W. Aquino Agdao, Davao City Name of Beneficiary Blk. Lot Total Area No. No. (sq.m.) 1. Villorejo, Josephine A. 1 1 73.05 2. Agad, Sheryl M. 1 2 86.83 3. Caliso, Melinda M. 1 3 79.94 4. Marquez, Kathy Mae C. 1 4 93.73 5. Bacorio, Elvie G. 1 5 85.46 6. Malabas, Jasper T. 1 7 45.48 7. Baculi, Bebelyn T. 2 1 73.05 8. Ortega, Agnes Gay M. 2 3 82.70 9. Espina, Renato C. 2 4 92.35 10. Burgos, Edgar M. 2 5 85.46 11. Restor, Alejandro Jr. L. 3 1 86.83 12. Enriquez, Irish Mae B. 3 2 89.59 13. Caballero, Evelyn P. 3 3 88.21 14. Encarnacion, Rolyn Mae D. 3 4 90.97 15. Aparri, Rachelle Jane P. 3 5 95.10 16. Laragas, Alex P. 3 6 90.97 17. Bacorio, Reymundo Jr. G. 4 1 19.30 18. Berbosidad, Ariel G. 4 2 19.30 19. Pascual, Candido Jr. O. 4 3 78.56 20. Bacorio, Arjay A. 4 4 37.21 21. Murcia, Loreto P. 4 5 52.38 22. Eroy, Nenita M. 4 6 90.97 23. Enriquez, Mariessa B. 4 7 51.00 24. Alferez, Divina M. 4 8 88.21 25. Dagatan, Jeffrey P. 4 9 97.86 26. Gencianos, Charlita A. 5 1 126.81 27. Premacio, Dennis Sr. 5 2 113.02 28. Casin, Roderick D. 5 3 71.67 29. Dagatan, Gloria Lina P. 5 4 97.86 30. Benemerito, Diosario B. 5 5 84.08 31. Dagatan, Joseph P. 5 6 82.70 32. Bigno, Tizza B. 6 1 100.62 33. Quintano, Doris B. 6 2 89.59 34. Balani, Renato C. 6 3 92.35 35. Jebone, Angelica G. 6 4 89.59 36. Agramon, Arvin Roman B. 6 5 128.18 37. Sagadal, Caren A. 6 6 115.78 38. Dagatan, Lemuel P. 7 1 104.75 39. Abregana, Charmaine L. 7 2 113.02 40. Carreon, Aracelie T. 7 3 81.32 41. Lucente, Marichu L. 7 4 93.73 42. Polinar, Jaime Jr. C. 7 5 84.08 43. Roluna, Eljoy P. 7 6 86.83 44. Polinar, Jaycelmae C. 8 1 90.97 45. Tipdas, Robert Sr. U. 8 2 97.86 46. Baguio, Jenefer D. 8 3 86.83 47. Iigo, Ivy Loreen B. 8 4 44.11 48. Samson, Felipa I. 8 5 44.11 49. Obaob, Rafael P. 8 6 97.86 50. Lee, Mary Cris L. 8 7 103.38 51. Pascua, Annabelle B. 9 1 110.27 52. Arcena, Ranel B. 9 2 115.78 53. Lolo, Edgardo B. 9 3 93.73 54. Moring, Aireen Mae P. 9 4 84.08 55. Pascual, Jaime Jr. 9 5 95.10 56. Aguilar, Airen A. 9 6 84.08 57. Tabilon, Josseielin D. 10 1 108.89 58. Aladad, Adolfo Jr. M. 10 2 107.51 59. Baria, Rhona A. 10 4 90.97 60. Bunao, Charles Roque O. 10 5 104.75 61. Resurrecion, Ian Lee M. 10 6 111.64 62. Ramilla, Geneveve P. 11 1 53.75 63. Fernandez, Pepita C. 11 2 60.65 64. Ramilla, Germaine P. 11 3 55.13 65. Arcena, Herbert B. 11 4 59.27 66. Luciano, Solimae M. 11 5 85.46 67. Maebano, Evangeline C. 11 6 86.83 68. Komiyama, Lorna A. 11 7 84.08 69. Olivar, Aaron B. 11 8 89.59 70. Batingal, Crisaldo 12 1 100.62 71. Calunod, Joel P. 12 2 99.24 72. Rodriguez, Arianne Rose C. 12 3 90.97 73. Gajudo, Johassan A. 12 4 78.56 74. Sagetarlos, Ellen P. 12 5 111.64 75. Gajudo, Butch A. 12 6 113.02 76. Fuentes, Donny Dave C. 13 1 53.75 77. Aguilar, Butch A. 13 2 64.78 78. Fuentes, Drake Arthur C. 13 3 52.38 79. Aguilar, Emmy Lou A. 13 4 64.78 80. Balnaja, Mary Ann C. 13 5 82.70 81. Barrios, Mary Grace B. 13 6 100.62 82. Villar, Lielanie D. 13 7 86.83 83. Neri, Roger B. 13 8 99.24 84. Costan, Christian A. 14 1 97.86 85. Maturan, Carlito Jr A. 14 2 100.62 86. Balaod, Ellen Mae R. 14 3 92.35 87. Alumbro, Marilyn T. 14 4 44.11 88. Sale, Teodoro Jr I. 14 5 46.86 89. Inguillo, Eduardo S. 14 6 139.21 90. Matulin, Ryan P. 14 7 115.78 91. Banzon, Bob Ethfiel P. 15 1 82.70 92. Banzon, Beverly P. 15 2 84.08 93. Caderao, Abba Rabbi B. 15 3 100.62 94. Neri, Julian B. 16 1 125.43 95. Cabras, Marilou G. 16 2 122.67 96. Enriquez, Elsa B. 16 3 82.70 97. Enriquez, Arnel R. 16 4 82.70