BIR Ruling No. 258-12

April 20, 2012 BIR RULING NO. 258-12 RA 7279; BIR Ruling No. 150-11; BIR Ruling No. 030-12 Pinagkaisang Maralita ng Santan Homeowners Association, Inc. Santan II St.,Fortune Marikina City Attention: Elpidio V. Felipe President Gentlemen : This refers to your letter dated June 4, 2010 requesting on behalf of Pinagkaisang Maralita ng Santan Homeowners Association, Inc. ("Homeowners' Association") for an exemption from the payment of capital gains tax relative to the transfer/individualization of title of a parcel of land from the Homeowners' Association in favor of its qualified member-beneficiaries pursuant to Republic Act 7279 otherwise known as the "Urban Development and Housing Act of 1992". It is represented that the Homeowners' Association ,with Taxpayer's Identification (TIN) No. 005-543-631-000, is a non-stock, non-profit organization duly registered with the Housing and Land Use Regulatory Board (LURB);that it is the registered owner of a parcel of land located at Parang, Marikina City and covered by Transfer Certificate of Title (TCT) No. 352394 issued by the Registry of Deeds for Marikina City; that said parcel of land was subdivided into several lots and new TCTs were issued therefor in the name of the Homeowners' Association ;that the aforesaid lot was acquired through a loan under the Community Mortgage Program (CMP) of the Social ousing Finance Corporation (SHFC);that said project was taken-out/paid on July 20, 1998 in the amount of Three Million Eight Hundred Forty Thousand Pesos (P3,840,000.00);and that the Homeowners' Association is now in the process of transferring the certificates of title of purchased property to its qualified member-beneficiaries, namely: EaDATc Name of Beneficiary Blk. No. Lot No. Total Area (sq. m.) 1. Ancot, Alberto A. 1 1 24 2. Ancot, Crestito Dp. 1 2 24 3. Bandal, Violeta 1 3 25 4. Roxas, Marilyn M. 1 4 25 5. Roxas, Fely M. 1 5 25 6. Garcia, Myra J. 1 6 25 7. Panlican, Marina G. 1 7 25 8. Cuaresma, Martin M. 1 8 25 9. Rivera, Manuel C. 1 9 24 10. Furton, Alexander V. 1 10 24 11. Aquino, Marilou L. 1 11 24 12. Aquino, Lilibeth A. 1 12 24 13. Gendrano, Victoria A. 1 13 24 14. Vale, Rolando P. 1 14 24 15. Geraldo, Fernando A. 1 15 24 16. Encinas, Joseph L. 1 16 24 17. Alvarez, Ernesto Jr. M. 1 17 24 18. Ancot, Velbert Dp. 1 18 24 19. Alvarez, Mercedes M. 2 1 26 20. Camargo, Sim C. 2 2 24 21. Felipe, Elpidio V. 2 3 24 22. Peana, Moises Cyrus E. 2 4 24 23. Santiago, Vilma S. 2 5 24 24. Peana, Vicente Ronald E. 2 6 24 25. Camacho, Maura B. 2 7 24 26. Ode, Jessie A. 2 8 25 27. Mitra, Remigio M. 2 9 24 28. Gabriel, Roberto S. 2 10 25 29. Garcia, Marita J. 2 11 24 30. Naquin, Judy J. 2 12 25 31. Reburiano, Ana Maria G. 2 13 24 32. Ocampo, Marilou M. 2 14 25 33. Lababo, Ma. Socorro N. 2 15 24 34. Mendioro, Chona D. 2 16 25 35. Blanco, Ronaldo S. 2 17 24 36. Morata, Rubina P. 2 18 25 37. Magalso, Lauro J. 2 19 24 38. Naquin, Gorgonio J. 2 20 24 39. Furton, Gaspar V. 2 21 24 40. Garcia, Marites J. 2 22 24 41. Camacho, Joselito T. 2 23 24 42. Dugos, Wencislao Jr. C. 2 24 24 43. Dimatanggal, Ricardo M. 2 25 24 44. Galit, Eduardo T. 2 26 24 45. Mendioro, Tomas M. 2 27 24 46. Mendioro, Eleonor M. 3 1 25 47. De Leon, Marilou N. 3 2 25 48. Laparan, Jerson L. 3 3 25 49. Adordonicio, Amelia R. 3 4 25 50. Gabriel, Joselito S. 3 5 25 51. Bejuna, Ma. Isabel R. 3 6 25 52. Bejuna, Josephine R. 3 7 25 53. De la Rosa, Ramon B. 3 8 25 54. Napilan, Ma. Elisa A. 3 9 25 55. Unabia, Jinar R. 3 10 25 56. Garcia, Camilo Jr. J. 3 11 25 57. Naquin, Jonathan J. 3 12 25 58. Leones, Divina M. 3 13 25 59. Leones, Primitivo N. 3 14 25 60. Monteroso, Joselito M. 3 15 25 61. Austero, Santos B. 4 1 24 62. Garcia, Bernardo J. 4 2 24 63. Morata, Angelo S. 4 3 24 64. Monteroso, Erlinda M. 4 4 24 In support of its request, the Homeowners' Association has completely submitted on December 6, 2011 the following documents: 1) Written Application for Exemption filed with the Law Division; 2) Certified True Copy of the Transfer Certificate of Title (TCT); 3) Certification from the Social Housing Finance Corporation (SHFC) that the property was acquired through CMP; 4) Certified true copy of the Articles of Incorporation of the Homeowner Association; 5) Certified true copy of the Master list of qualified beneficiaries duly certified by the HLURB; 6) Certified True Copy of the Collection Agreement between National Home Mortgage Finance Corporation and the Homeowners' Association; 7) Copy of a sample Deed of Sale; 8) Subdivision Plan; and 9) BIR Certificate of Registration of the Homeowner Association. In reply, please be informed that the transfer in favor of your individual member-beneficiaries of the said subdivided parcels of land is not subject to either the capital gains tax imposed under Section 27 (D) (5) of the Tax Code of 1997, as amended, or the creditable withholding tax imposed under Revenue Regulations No. 2-98, as amended, implementing Section 57 (B) of the same Code, considering that the said transfer of lots is without any consideration since it is merely a formality to finally effect the transfer of the said lots to its member-beneficiaries who actually bought the same from the former owner through your Association. In other words, the association is in fact transferring the ownership of the lots to its member-beneficiaries who actually own the same. (BIR Ruling No. 150-11 dated May 17, 2011) Furthermore, the said transfer is not subject to the donor's tax imposed under Section 99 of the Tax Code of 1997, since there is no donative intent or intention on the part of the Association to donate the said property to said member-beneficiaries, considering that it could not donate property the ownership of which belong to the donees (member-beneficiaries) themselves. It is noted that under Section 196 of the Tax Code of 1997, the deeds or documents subject to the documentary stamp tax imposed therein are those where the realty sold shall be granted, assigned, transferred, or otherwise conveyed to a purchaser or purchasers or to any other person or persons designated by such purchaser or purchasers, thereby excluding from its purview the instant case considering that the supposed purchasers are actually the owners thereof. Besides, no consideration is involved in said transaction upon which the tax imposed could be based. EAIaHD Accordingly, the transfer of title of the said property in favor of your member-beneficiaries is not subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. However, the notarial acknowledgment to said deed of conveyance is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the Tax Code of 1997. 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 selling price per sale transaction for each qualified beneficiary does not exceed the price ceiling of P400,000.00 for house and lot packages and P160,000.00 for lots only, pursuant to Revenue Regulations No. 17-2001. (BIR Ruling No. 30-2012 dated January 16, 2012) 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