BIR Ruling No. 290-14

July 21, 2014 BIR RULING NO. 290-14 RA No. 7279; BIR Ruling No. 109-13 Kalawaan Rose-Ofreng Village Homeowner's Association Inc. Phase III Axis Road, Brgy. Kalawaan, Pasig City Attention: Aida I. Lipata President Gentlemen : This refers to the letter of Ma. Ana R. Oliveros, President of Social Housing Finance Corporation (SHFC) dated January 23, 2014, endorsing the sale transaction between Knecht Incorporated, in trust for the benefit of the stockholders and creditors of Rose Packing Company, Inc. and Kalawaan Rose-Ofreng Village Homeowner's Association, Inc. Phase III 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 Knecht Incorporated (TIN 240-036-525-001-000) (hereinafter referred to as Landowner) is the registered owner of a parcel of land, identified as Resurvey plan (LRC) RS-130, described in TCT No. 120548, LRC (GLRO) Rec. No. 1661 (1243) covered by Transfer Certificate of Title (TCT) No. PT-128541 issued by the Registry of Deeds for City of Pasig. The aforesaid property is situated at Brgy. Kalawaan, Pasig City with an area of Eighteen Thousand One Hundred Forty One square meters (18,141 sq.m.), more or less. Kalawaan Rose-Ofreng Village Homeowner's Association, Inc. Phase III (TIN 444-926-391-000), on the other hand, is a homeowner's organization duly registered with the Housing and Land Use Regulatory Board (HLURB). On October 29, 2013, the parties executed a Deed of Absolute Sale whereby the Landowner transferred and conveyed transferred and conveyed Five Thousand Nine Hundred Eighty square meters (5,980 sq.m.) of the subject property to Kalawaan Rose-Ofreng Village Homeowner's Association, Inc. Phase III at an agreed price of Three Thousand Pesos (P3,000.00) per square meter or Seventeen Million Nine Hundred Forty Thousand Pesos (P17,940,000.00). Pursuant to the certification issued by SHFC, Five Thousand Nine Hundred Eighty square meters (5,980 sq.m.) out of Eighteen Thousand One Hundred Forty One square meters (18,141 sq.m.) covered by TCT No. PT-128541 actually comprise a Community Mortgage Program (CMP) Project and shall be proportionately distributed to the association's qualified member-beneficiaries. For this purpose, Kalawaan Rose-Ofreng Village Homeowner's Association, Inc. Phase III 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 19, 2013. In support of its request, Kalawaan Rose-Ofreng Village Homeowner's Association, Inc. Phase III has completely submitted on April 10, 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; SaIEcA 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 Kalawaan Rose-Ofreng Village Homeowner's Association, Inc. Phase III of Five Thousand Nine Hundred Eighty square meters (5,980 sq.m.) portion of the property covered by TCT No. PT-128541 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 landowner is liable to pay the documentary stamp tax on the documents 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 RMO15-2003. (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. CaAcSE Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner Bureau of Internal Revenue ATTACHMENT Kalawaan Rose-Ofreng Village Homeowner's Association, Inc. Phase III Axis Road, Brgy. Kalawaan, Pasig City Name of Beneficiary Blk. Lot Total Area No. No. (sq.m.) 1 Troyo, Bibiano R. 1 1 37.34 2 De Guzman, Alex V. 1 2 35.90 3 Villarta, Jaime Rico C. 1 3 35.90 4 Martines, Jorjet P. 1 4 35.90 5 Noe, Josefina H. 1 5 35.90 6 Aniero, Marita DC. 1 6 35.90 7 Borja, Marlon S. 1 7 35.90 8 Borja, Mervin S. 1 8 35.90 9 Yoshioka, Jose Francisco HR. 1 9 35.90 10 De Pedro, Alberto Jr. F. 1 10 35.90 11 Herrera, Arlene S. 1 11 33.75 12 Villadiego, Mario C. 1 12 33.75 13 Barajas, Angelo B. 1 13 33.75 14 Bermudo, Redita I. 1 14 33.75 15 Baterna, Rogen E. 1 15 33.75 16 Macutay, Roderick C. 1 16 33.75 17 Candelaria, Gemma A. 1 17 33.75 18 Galang, Ronald S. 1 18 33.75 19 Manalo, Edwin R. 1 19 33.75 20 Sales, Carlito S. 1 20 33.75 21 Cello, Winico T. 1 21 33.75 22 Adaza, Rosalinda S. 1 22 33.75 23 Alonsagay, Marilyn 1 23 33.75 24 Delos Reyes, William Jr. L. 1 24 33.75 25 Delos Reyes, William Sr. L. 1 25 33.75 26 Salcedo, Jovito Jr. M. 1 26 33.75 27 Angaray, Lea T. 1 27 33.03 28 Balagbagan, Elena L. 1 28 35.90 29 Gines, Eva B. 1 29 35.90 30 Tabuyan, Nestor C. 1 30 35.90 31 Navarro, Teresita L. 1 31 35.90 32 Lipata, Aida I. 1 32 35.90 33 Malalay, Jorjette J. 1 33 35.90 34 Castro, Nonilo P. 1 34 35.90 35 Castro, Glicerio P. 1 35 31.59 36 Jamil, Dionisia W. 2 1 68.93 37 Yano, Gemalyn M. 2 2 34.47 38 Maas, Jessica M. 2 3 33.03 39 Palmos, Irene B. 2 4 37.34 40 Sarabosing, Marlene M. 2 5 35.90 41 Morales, Orly C. 2 6 37.34 42 Ferrer, Rose Marie D. 2 7 35.90 43 De Castro, Catherine D. 2 8 33.03 44 Arandela, Larry A. 2 9 34.47 45 De Castro, Imelda D. 2 10 37.34 46 Pucut, Cheryl T. 2 11 34.47 47 Morales, Romenito M. 2 12 35.90 48 Morales, Ronnie M. 2 13 34.47 49 Mirandilla, Raquel C. 2 14 35.90 50 Lipon, Imelda D. 2 15 34.47 51 Cuyos, Martialino T. 2 16 34.47 52 Barrientos, Helaria R. 2 17 34.47 53 Babao, Prescila 2 18 37.34 54 Gantala, Alan T. 2 19 35.90 55 Reveral, Angelica M. 2 20 34.47 56 Mamucod, Rayman L. 2 21 34.47 57 Valdez, Jocelyn M. 2 22 38.78 58 Balesteros, Narcisa L. 2 23 35.90 59 Francisco, Julie P. 2 24 35.90 60 Ferrarin, Nicolas Jr. M. 2 25 34.47 61 Bones, Herald T. 2 26 35.90 62 Galang, Romeo S. 2 27 34.47 63 San Pedro, Glaiza C. 2 28 35.90 64 Caluyloy, Rodolfo Jr. L. 2 29 35.90 65 Francisco, Remedios P. 2 30 35.90 66 Bernalez, Dolores M. 2 31 35.90 67 Hidalgo, Romeo P. 2 32 33.03 68 De Vera, Evageline O 2 33 35.90 69 Gonzales, Alice A. 2 34 28.72 70 Hernandez, Roda Lee V. 2 35 35.90 71 Perez, Tita V. 2 36 44.52 72 Tumala, Ronell T. 2 37 35.90 73 Vargas, Linda H. 2 38 34.47 74 Castillo, Eusebio E. 2 39 35.90 75 Lagrimas, Dino B. 2 40 34.47 76 Gutierrez, Ernesto E. 2 41 35.90 77 Castro, Jenelyn A. 2 42 22.98 78 Iyas, Richard E. 2 43 35.90 79 Ramos, Arlene DC. 2 44 22.98 80 Alamer, Anabelle S. 2 45 35.90 81 Cabusog, Emmanuel O. 2 46 22.98 82 Bermundo Analyn S.P. 2 47 35.90 83 De Tera, Erwin S.P. 2 48 34.47 84 Jerusalem, Marina C. 2 49 34.47 85 Zamora, Emily B. 2 50 16.52 86 Delos Santos, Francisco P. 2 51 16.52 87 San Pedro, Zenaida D. 2 52 34.47 88 Cabiles, Criselda P. 2 53 35.90 89 Tatukan, Usman T. 2 54 34.47 90 Zamora, Dionisio A. 2 55 35.90 91 Vitto, Eva S. 2 56 34.47 92 Ramiento, Arcele C. 2 57 35.90 93 Mozo, Annaliza C. 2 58 34.47 94 Andico, Ramonito B. 2 59 35.90 95 Sarabia, Julius Cesar P. 2 60 34.47 96 Garcia, Armando Jr. A. 2 61 35.90 97 Isalun, Gappar S. 2 62 34.47 98 Abucay, Geraldine V. 2 63 35.90 99 Cruz, Rosa S. 2 64 34.47 100 Baboso, Nor H. 2 65 35.90 101 Daisog, Reynaldo Jr. J. 2 66 31.59 102 Pagatpat, Leonilo L. 2 67 33.03 103 Cruz, Ronnie K. 3 1 40.21 104 Carreon, Dennies G. 3 2 41.65 105 Coronado, Victoriano D. 3 3 33.03 106 Parsomala, Fe O. 3 4 35.90 107 Castillo, Arnulfo R. 3 5 37.34 108 Consolacion, Rommel P. 3 6 38.78 109 Amante, Ricky C. 3 7 35.90 110 Macuja, Weliza D. 3 8 30.16 111 Mabingnay, Bonna A. 3 9 40.21 112 Borja, Jocelyn S. 3 10 38.78 113 Mabingnay, Lily A. 3 11 31.59 114 Perez, Jeffer Ace I. 3 12 35.90 115 Pangautan, Mario G. 3 13 33.03 116 Francisco, Joselito Q. 3 14 35.90 117 Signos, Emily D. 3 15 20.11 118 Perez, Nenita D. 3 16 37.34 119 Sarcos, Joan S. 3 17 20.11 120 Pangilinan, Joseph S. 3 18 35.90 121 Tuyac, Diosdado C. 3 19 31.59 122 Rabbino, Mark Anthony P. 3 20 35.90 123 Orejas, Criselda 3 21 30.16 124 Alao, Cristy R. 3 22 18.67 125 Delgado, Benjielito J. 3 23 30.16 126 Molina, Ma. Cristina D. 3 24 20.11 127 Delfin, Rowena DC. 3 25 33.03 128 Valdeavilla, Vilma V. 3 26 33.03 129 Placer, Emilie A. 3 27 33.03 130 Rivera, Marcelo R. 3 28 20.11 131 Ramos, Ronaldo G. 3 29 31.59 132 Esurea, Maricel L. 3 30 15.80 133 Catabay, Crispin A. 3 31 34.47 134 Gomez, Randy N. 3 32 33.03 135 Galindez, Luciano R 3 33 34.47 136 Capagalan, Estelita 3 34 33.03 137 Notario, Jose M. 3 35 41.65 138 Benigay, Jorge T. 3 36 35.90 139 Indicio, Redentor H. 3 37 27.29 140 Jara, Rio P. 3 38 35.90 141 Tuplano, Irene T 3 39 33.03 142 Tamon, Julieta M. 3 40 37.34 143 Tuplano, Rene T 3 41 35.90 144 Franco, Julie P. 3 42 35.90 145 Parreo, Nestor C. 3 43 34.47 146 Sarabosing, Antonio G. 3 44 37.34 147 Aquino, Marita DG. 3 45 37.34 148 Tugono, Armando V. 3 46 37.34 149 Caliao, Antonio T. 3 47 37.34 150 Lagria, Julius J. 3 48 38.78 151 Saragoza, Miguel V. 3 49 35.90 152 Bofer, Lolita L. 3 50 37.34 153 Olesco, Renato T. 3 51 40.21 154 Lim, Janilyn M. 3 52 38.78 155 Cadayday, Johnny A. 3 53 40.21 156 Baldemos, Marie Bee G. 3 54 37.34 157 San Pedro, Francisco R. 3 55 35.90 158 Montero, Marites D. 3 56 37.34 159 Castillo, Tito D. 3 57 38.78 160 Borja, Josefina B. 3 58 20.82 161 Castaos, Renato A. 3 59 20.82 162 Magbanua, Glenn S. 3 60 34.47 163 Parreo, Raymond P. 3 61 33.03 164 Soria, Marciano D. 3 62 40.21 165 Asil, Saguira M. 3 63 38.78 166 Balce, Susan D. 3 64 38.78 167 Lumanog, Danilo M. 3 65 35.90 168 Bautista, Ma. Celester A. 3 66 38.78 169 Turinit, Edgar G. 3 67 37.34 170 Llames, Generoso S. 3 68 41.65 171 Tugono, Manuel T. 3 69 38.78 172 Escartin, Marilyn O. 3 70 43.08 173 Mabingnay, Artemio T. 3 71 40.21