BIR Ruling No. 267-15

July 31, 2015 BIR RULING NO. 267-15 RA No. 7279; BIR Ruling No. 109-13 Upper Bonbonan Lot B & C Homeowners Association, Inc. Upper Bonbonan, Brgy. Labangon, Cebu City Attention: Olga M. Go President Gentlemen : This refers to the letter of Ma. Ana R. Oliveros, President of the Social Housing Finance Corporation (SHFC) dated January 8, 2015, endorsing the sale transaction between Maria Teresa Leonardo-Javelosa and Heirs of Paterno Rosal and Upper Bonbonan Lot B & C 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 Maria Teresa Leonardo-Javelosa and Heirs of Paterno Rosal (hereinafter referred to as Landowners) are the respective registered owners of two (2) parcels of land covered by two (2) Transfer Certificates of Title (TCT): Landowner TCT No. Tax Declaration No. Area (sq. m.) Maria Teresa 107-2012000825 GRC6-10-070-13676 1,433.33 Leonardo-Javelosa Heirs of Paterno 107-2009001176 GRC6-10-070-13677 1,433.33 Rosal 1 total area 2,866.66 ======= both issued by the Registry of Deeds for the Cebu City. The aforesaid properties are situated at A. Lopez St., Labangon, Cebu City. Upper Bonbonan Lot B & C Homeowners Association, Inc. (TIN 405-623-199-000), on the other hand, is a homeowner's organization duly registered with the Housing and Land Use Regulatory Board (HLURB). On June 5, 2013, the parties executed a Deed of Absolute Sale whereby the Landowners, through their Attorneys-in-Fact, Martin G. Javelosa and Antonio Rosal, transferred and conveyed One Thousand Eight Hundred Sixty One and 13/100 square meters (1,861.13 sq.m.) portion of the subject properties to Upper Bonbonan Lot C & B Homeowners Association, Inc. at an agreed price of Five Million Three Hundred Ninety Seven Thousand Two Hundred Seventy Seven Pesos (P5,397,277.00). Pursuant to the certification issued by SHFC, 1,861.13 sq.m. out of 2,866.66 sq.m. covered by TCT Nos. 107-2012000825 and 107-2009001176 actually comprise a Community Mortgage Program (CMP) Project and shall be proportionately distributed to the association's qualified member-beneficiaries. 2 For this purpose, Upper Bonbonan Lot B & C 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 December 29, 2014. cTDaEH In support of its request, Upper Bonbonan Lot B & C Homeowners Association, Inc. has completely submitted on January 23, 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 Deed of Absolute Sale to the Community Association; 4) Certified true copy of the Articles of Incorporation of the Community Association; 5) Certified true copy of the Masterlist of Qualified Beneficiaries duly certified by the SHFC; 6) Certified true copies of the TCTs and Latest Tax Declarations of the Property Sold to the Community Association; 7) Certified true copy of the Location Plan of the Lot Sold to the Community Association; 8) TIN ID/BIR Certificate of Registration of the seller and the Homeowner Association; and 9) 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: cSaATC 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 Upper Bonbonan Lot B & C Homeowners Association, Inc. of the 1,861.13 sq.m. portion of the of 2,866.66 sq.m. covered by TCT Nos. 107-2012000825 and 107-2009001176 is exempt from the capital gains tax. 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 realties or their fair market values 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 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) cHDAIS 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 sellers are entitled to exemption from capital gains tax or income tax imposed under Sec. 24 (D) (1) the Tax Code of 1997, as amended. 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 Upper Bonbonan Lot B & C Homeowners Association, Inc. Upper Bonbonan, Brgy. Labangon, Cebu City Name of Beneficiary Blk. No. Lot No. Total Area (sq.m.) 1 Ortega, Norma L. 1 7 38.08 2 Constantino, Gemma C. 2 6 32.13 3 Quillosa, Ma. Jeanny Ve Q. 2 7 33.32 4 Quijano, Jenelyn O. 2 8 33.32 5 Sands, Rutchie Q. 2 9 33.32 6 Empic, Fe P. 2 10 20.23 7 Empic, Jesus P. 2 11 20.23 8 Castil, Leonard D. 2 12 29.75 9 Castil, Marjun D. 2 13 29.75 10 Alburo, Ronald D. 2 15 21.42 11 Alburo, Rocelyn D. 2 16 21.42 12 Oliamot, Melchor D. 2 17 27.37 13 Sungkip, Rosalina D. 2 19 39.27 14 Quiamot, Jameloun D. 2 20 20.23 15 De Guzman, Maricel D. 2 21 34.51 16 Palenso, Gwendolyn D. 2 22 44.03 17 Palenso, Philip D. 2 23 44.03 18 Cabagte, Jerson D. 2 25 32.13 19 Amad, Ana Lourdes D. 2 26 38.08 20 Bojorque, Jake Floyd D. 2 27 19.04 21 Quijano, Joeralyn 3 1 38.08 22 Abapo, Janette T. 4 1 29.75 23 Teves, Michael R. 4 2 29.75 24 Villasencio, Marlindo C. 4 8 22.61 25 Zafra, Rosalinda V. 4 9 23.80 26 De Guzman, Dionesa 4 10 26.18 27 Gerasmio, Anastacio L. 4 11 26.18 28 Dela Cruz, Maritess B. 4 13 26.18 29 Labrado, Elizabeth B. 4 14 22.61 30 Anor, Conchita M. 4 15 23.80 31 Ygonia, Mirasol C. 4 16 29.75 32 Bitoon, Shiella L. 4 17 24.99 33 Bitoon, Marvic L. 4 18 24.99 34 Cania, Jansen Q. 4 19 51.17 35 Cania, Mervelyn C. 4 20 49.98 36 Cania, Mervel Q. 4 21 33.32 37 Lucernas, Tony M. 5 2 35.70 38 Tumulak, Oliver L. 5 3 35.70 39 Tumulak, David L. 5 4 34.51 40 Blesterio, Gilbert M. 5 5 33.32 41 Gallardo, Aileen E. 5 6 33.32 42 Elesterio, Jason C. 5 7 33.32 43 Estaero, Joel P. 5 8 36.89 44 Estaero, Glenn P. 5 9 35.70 45 Villarin, Rio L. 7 1 38.08 46 Villarin, Perla L. 7 2 36.89 47 Mosquite, Rosalinda C. 7 3 29.75 48 Clitar, Adelaida G. 7 4 28.56 49 Lodovica, Arnulfo G. 7 5 32.13 50 Lodivica, Chiqui G. 7 6 32.13 51 Go, Olga M. 7 7 32.13 52 Caintic, Mark L. 7 8 30.94 53 Caintic, Glenn L. 7 9 32.13 54 Tagalog, Gwendolyn A. 7 10 28.56 55 Caiintic, Niel L. 7 11 29.75 56 Caiintic, Lor Danieleon L. 7 12 29.75 57 Go, Michael Joey M. 7 13 30.94 58 Arcenal, Maribel B. 7 16 40.46 59 Go, Luide E. 7 18 35.70 Footnotes 1. Oscar Rosal, Thelma Rosal, Carmencita Rosal, Victor Rosal, Rey Rosal, Ma. Carol Rosal, Romualdo Rosal, Antonio Rosal and Flora Milagros Rosal. 2. See Annex for the masterlist of qualified beneficiaries.