BIR Ruling No. 248-15

July 21, 2015 BIR RULING NO. 248-15 RA No. 7279; BIR Ruling No. 474-14 National Housing Authority Quezon Memorial Elliptical Road, Diliman, Quezon City Attention: Mr. Felicisimo F. Lazarte, Jr. Group Manager Northern and Central Luzon Management Office Gentlemen : This refers to your letter dated April 14, 2015, requesting Certificate of Tax Exemption from payment of capital gains tax on the sale of a land containing a total area of Twenty One Thousand Twenty One (21,021) square meters, more or less, covered by Transfer Certificate of Title (TCT) No. 040-2014013705 pursuant to Republic Act (RA) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". Documents submitted show that Fernando P. Vergara (married to Herminia P. Vergara), Guilermina C. Vergara (widow), Frederick C. Vergara (married to Jocelyn P. Vergara), Ritchell C. Vergara (married to Ma. Lilibeth M. Vergara), Richardson C. Vergara, Mirasol C. Vergara, and Rodolfo C. Vergara, Jr. (all single), (hereinafter referred to as Landowners) are the registered owners of a parcel of land, without improvement, containing a total area of Eighty Four Thousand Seven Hundred Seventy Five (84,775) square meters, more or less, covered by Transfer Certificate of Title (TCT) No. 040-2014013705 situated in Brgy. Tigbe, Norzagaray, Bulacan and known as the "Katuparan Village Resettlement Project". The National Housing Authority (NHA) (TIN: 000-916-384-012), on the other hand, is a government corporation organized and existing by virtue of Presidential Decree No. 757, as amended. On April 13, 2015, the landowners, herein represented by Phintecstar Construction, Inc. (TIN: 001-034-067-000) and the NHA, represented by its General Manager, Atty. Chito M. Cruz, executed a Deed of Absolute Sale whereby the former transferred and conveyed Five Hundred (500) developed lots or parcels of land under Phase 1 (Batch 1-2014) with a total aggregate area of Twenty One Thousand Twenty One (21,021) square meters, more or less, to the latter at One Hundred Fifteen Thousand Pesos (P115,000.00) per lot per family for a minimum lot size of forty (40) square meters or at a total agreed price of Fifty Seven Million Five Hundred Thousand Pesos (P57,500,000.00), Philippine Currency. The above described property shall be used as a resettlement site for members/families living in danger areas and affected by the clearing of waterways and esteros from Metro Manila. The acquisition of said developed lots shall be acquired by the NHA through the Community Initiative Approach Program (CIAP). ICHDca In reply, please be informed that pursuant to Sections 19 and 20 of Republic Act (RA) No. 7279, pertinent portions of which state that: "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 from the payment of documentary stamp tax and registration fees, including fees required for the issuance of transfer certificates of title. "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: xxx xxx xxx "(d) Exemption from the payment of the following: (1) (2) Capital Gains Tax;" xxx xxx xxx The landowner who sells his property for use in a socialized housing project is exempt from the payment of the capital gains tax. Such being the case, the sale by Fernando P. Vergara, Guilermina C. Vergara, Frederick C. Vergara, Ritchell C. Vergara, Richardson C. Vergara, Mirasol C. Vergara, and Rodolfo C. Vergara, Jr., to NHA of the Twenty One Thousand Twenty One (21,021) square meters portion of the Eighty Four Thousand Seven Hundred Seventy Five (84,775) square meters parcel of land covered by TCT No. 040-2014013705 is exempt from capital gains tax. (BIR Ruling No. 474-14 dated November 24, 2014) Moreover, pertinent portions of RMC No. 42-01 dated October 5, 2001, provide, viz. : cDHAES xxx xxx xxx A. National Housing Authority (NHA) The NHA, being the primary government agency in charge of providing housing for the underprivileged and homeless citizens shall be exempted from the payment of the following national internal revenue taxes: (1) . . . (2) Documentary stamp tax on sales transactions executed by and in favor of the NHA in connection with socialized housing projects. Since Section 19 of R.A. 7279 exempts "all documents or contracts executed by and in favor of the NHA," the exemption from documentary stamp tax extends to the other party (either seller or buyer) that is dealing or transacting with the NHA. xxx xxx xxx The exemption from documentary stamp tax of NHA in connection with any of its socialized housing project extends to the other party (either seller or buyer) that deals or transacts with the NHA. Consequently, since NHA is a party to the sale, no documentary stamp tax shall be due on such sale, either on NHA or Fernando P. Vergara, Guilermina C. Vergara, Frederick C. Vergara, Ritchell C. Vergara, Richardson C. Vergara, Mirasol C. Vergara, and Rodolfo C. Vergara, Jr. Accordingly, the sale of the subject property covered by TCT No. 040-201401370 is likewise exempt from documentary stamp tax imposed under Section 196 of the Tax Code of 1997, as amended. (BIR Ruling No. 474-14 dated November 24, 2014) Upon application for exemption, a lien on the title of the land shall be annotated by the Register of Deeds having jurisdiction over the property, to the effect that the same is to be applied or is being applied to socialized housing project pursuant to RA 7279. Please take note 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 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) after the submission of the requirements provided under RMO 15-2003. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue