BIR Ruling No. 254-15

July 21, 2015 BIR RULING NO. 254-15 RA No. 7279; BIR Ruling No. 418-13; BIR Ruling No. 129-12 Stateland, Inc. 3rd Floor State Centre Bldg., 333 Juan Luna St., Binondo, Manila 1006 Attention: Mr. Bernardo M. Nicolas, Jr. Gentlemen : This refers to your letter dated April 8, 2013, requesting Certificate of Tax Exemption for the Casa Laguerta Project in Barangay Laguerta, Calamba City, Laguna, pursuant to Republic Act (R.A.) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". Documents submitted show that Stateland, Inc. with Taxpayer's Identification No. 000-341-850-000 is corporation duly organized and existing under Philippine laws; that it is registered with the Securities and Exchange Commission (SEC) under Registration No. 68129; that it is the developer of a housing project known as Casa Laguerta located at Barangay Laguerta, Calamba City, Laguna; that Stateland, Inc. bought parcels of land (raw lands) from several registered owners/individuals, which shall be used for its socialized housing project, the pertinent details of which are as follows, to wit: ASEcHI TCT No. Seller/s Area Purchased Purchase (Sq.m.) Area Price (Php) T-461412 Odette T. Tiu 22,698 22,698 7,944,300.00 T-415273 Ray A. Velasco, 648 648 181,440.00 married to Carla Sue S. Velasco Yolanda T. Young 3,665 3,665 1,026,200.00 Joyce Y. Lim 2,186 1,803 504,840.00 6,499 T-394979 Alfredo T. Mendoza 45,445 509 173,060.00 married to Christina O. Mendoza 29,323 ====== and that the project is duly registered with the Housing and Land Use Regulatory Board (HLURB) under Certificate of Registration No. 24604 and License to Sell No. 27514 both issued by the HLURB Southern Tagalog Region, Dencris Business Center, Bargy. Halang, Calamba City dated July 8, 2013, to wit: Casa Laguerta HLURB Certificate of Registration No. 24604 License to Sell No. 27514 (488 lots/units) "Compliance to Section 18 of RA 7279 credited to: Gran Avila Phases 1 & 2 located at Brgys. Majada & Sirang Lupa, Calamba City No. of Units = 39 units for Phase 1 44 units for Phase 2 NON-SALEABLE AREAS: Parks/Playground: Block 4, Lot 1 Community Facilities: Block 4, Lot 3 Water Tank: Block 10 Excluded Portion: Block 24, Lot 1 Encroachment: Block 2, Lot 34 Lot 1895-A-3 Reserved Area: Block 4, Lots 2 & 4 405 lots/units for future utilization of the compliance project intended for Stateland, Inc." cTDaEH xxx xxx xxx "Compliance to Section 18 of RA 7279 credited to the following: Gran Avila Phase 1-A = 6 Gran Avila Phase 3 = 41 Gran Avila Phase 4 = 30 Gran Avila Phase 5 = 13 Total 90 == Remaining credits = 315 lots/units" xxx xxx xxx In reply, please be informed that Section 20 of RA No. 7279, reads: "Sec. 20. Incentives for the 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) Project-related income taxes; (2) Capital gains tax on raw lands used for the project; (3) Value-added tax for the project contractor concerned." xxx xxx xxx Sale by the Landowners to Stateland, Inc. The owners of the raw lands are exempt from the payment of Capital Gains Tax or the Withholding Tax under Revenue Regulations No. 2-98, as amended, on the conveyance of the parcels of land which shall be utilized in the aforesaid socialized housing project, Casa Laguerta. (BIR Ruling No. 418-13 dated November 13, 2013) The HLURB certified that Casa Laguerta is a socialized housing project. Accordingly, the sale by the abovementioned registered owners/individuals to Stateland, Inc. of the aggregate area of Twenty Nine Thousand Three Hundred Twenty Three (29,323) square meters, more or less, on which the Four Hundred Eighty Eight (488) housing units shall be constructed for the qualified buyers/beneficiaries, is exempt from the payment of capital gains tax imposed under Sec. 24 (D) of the Tax Code of 1997, as amended, or creditable tax under Revenue Regulations No. 2-98, as amended. The sale by the landowners to Stateland, Inc. however, is subject to the documentary stamp tax under Section 196 of the Tax Code of 1997, as amended. Transaction between the developer and qualified buyers/beneficiaries Only the sale of socialized housing units to qualified beneficiaries shall be exempt from income taxes, and consequently, from creditable expanded withholding tax prescribed under Revenue Regulations (R.R.) No. 2-98, as amended. Thus, a buyer of a socialized housing unit shall be required by the developer/owner/seller to execute a sworn statement that he is eligible as a socialized housing beneficiary provided under Section 5 (A) of R.R. No. 11-97. Section 5 (A) of R.R. No. 11-97 provides that: SEC. 5. Requirements/Conditions for the Availment of Tax Incentives/Exemptions. A. To qualify for socialized housing program, a beneficiary: (a) must be a Filipino citizen; (b) must be an underprivileged and homeless citizen, as defined in Section 3(t) of the Act and Section 2(r) of these Regulations; (c) must not own any real property, whether in the urban or rural areas; and (d) must not be a professional squatter or a member of squatting syndicates. In this connection, any sale made by the owner and developer to interested parties other than the principal target beneficiaries under Sections 3 (t) and 16 of RA No. 7279, shall not be entitled to the foregoing tax exemption should there be non-compliance with any of the aforestated sine qua non terms and conditions. (BIR Ruling No. 129-12 dated February 23, 2012) It is, however, understood that the Certificate Authorizing Registration (CAR) shall only be issued after it is established upon proper verification by the Revenue District Officer (RDO) concerned that, considering the rules on valuation of real property, the actual selling price per sale transaction of the house and lot packages in this case does not really exceed P450,000.00 and P180,000.00 for lot only. Thus, sale of a house and lot or lot only above the maximum amount shall be subject to the corresponding internal revenue taxes. Nonetheless, it is observed that documentary stamp tax is not one of the taxes covered by the tax exemption clause in Section 20 of RA No. 7279. Such being the case, the owner/project developer/seller shall be liable to pay the documentary stamp tax on the documents conveying the properties imposed under Section 196 of the Tax Code of 1997, as amended, based on the consideration contracted to be paid for such realties or on their fair market value determined in accordance with Section 6 (E) of the said Code, whichever is higher. Pursuant to Section 20 of RA 7279, a project contractor of a socialized housing project shall also be exempt from the payment of value-added tax (VAT) on the project concerned. Relative thereto, Section 4.109-1 (B) (1) (p) (3) of RR No. 16-2005 states that: "Section 4.109-1. VAT-Exempt Transactions. (A) In general. "VAT-exempt transactions" refer to the sale of goods or properties and/or services and the use or lease of properties that is not subject to VAT (output tax) and the seller is not allowed any tax credit of VAT (input tax) on purchases. cSaATC xxx xxx xxx (B) Exempt transactions. (1) Subject to the provisions of Subsection (2) hereof, the following transactions shall be exempt from VAT: xxx xxx xxx (p) The following sales of real properties are exempt from VAT, namely: xxx xxx xxx (3) Sale of real properties utilized for socialized housing as defined under RA No. 7279, and other related laws, such as RA No. 7835 and RA No. 8763, wherein the price ceiling per unit is P225,000.00 or as may from time to time be determined by the HUDCC and the NEDA and other related laws. . . . ." Furthermore, pursuant to HUDCC Resolution No. 1, Series of 2013, dated October 16, 2013 and as circularized by Revenue Memorandum Circular No. 035-14, pertinent portion of which reads: "THEREFORE BE IT RESOLVED, AS IT IS HEREBY RESOLVED that the price ceiling for horizontal socialized housing be adjusted from P400,000.00 to P450,000.00." the newly adjusted price ceiling of P450,000.00 for socialized housing shall apply to sale of real properties utilized for socialized housing, as defined under R.A. No. 7279 otherwise known as "Urban Development and Housing Act", and other related laws such as R.A. No. 7835 otherwise known as the "Comprehensive and Integrated Shelter Financing Act of 1994" and R.A. No. 8763 otherwise known as the "Home Guaranty Act of 2000", beginning December 18, 2013. Moreover, Section 2 of Revenue Regulations No. 17-2001 provides: Section 2. Definition of Terms. As used in these Regulations, the following terms shall have the following meaning: xxx xxx xxx "A socialized housing unit shall not exceed P150,000.00 (now P450,000.00) for a house and lot package, subject to periodic adjustment or increase as the Housing and Land Use Regulatory Board (HLURB) may effect from time to time. In the case of sale of homelots only, the price shall not exceed forty percent (40%) of the maximum limit prescribed for the house and lot package ." (Emphasis supplied) The developer of the socialized housing units under RA No. 7279 is exempt from the payment of value-added tax pursuant to the aforecited provision. However, purchases of goods/articles by the project contractor shall be subject to value-added tax, even if the said purchases are to be used for the socialized housing project. Moreover, it shall be understood that it must issue non-VAT official receipts on its gross receipts from the said socialized housing project. CHTAIc Accordingly, sale of the House and Lot/Units in Casa Laguerta covered by HLURB License to Sell No. 27514 (for 488 lots & units-socialized housing) not exceeding the price ceiling of P450,000.00 (house and lot package) and P180,000.00 (homelots only) to qualified beneficiaries should be exempt from income taxes and, consequently, from creditable expanded withholding tax and from VAT pursuant to RA 7279. 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