Sale by DBP of Real Property under CMP Exempt from Capital Gains Tax

July 8, 1993 BIR RULING NO. 293-93 SALE BY DBP OF REAL PROPERTY UNDER CMP EXEMPT FROM CAPITAL GAINS TAX 21 (e), 24 01-93 93-93 Guadalupe Subdivision Neighborhood Association, Inc. San Pablo City Attention: Mr . Zaldy Rodriguez President This refers to your letter dated February 15, 1993 in effect, requesting for a ruling that the sale by Development Bank of the Philippines, Lucena Branch, Lucena City, of its real properties located at Guadalupe Subdivision Phases 1 & 2, San Pablo City to the Guadalupe Subdivision Neighborhood Association, Inc., a non-stock, non-profit community organization duly registered with the Securities and Exchange Commission (SEC) in accordance with the Community Mortgage Program (CMP) initiated by the National Housing Authority is exempt from capital gains tax pursuant to Section 32(a) and (b) of R.A. 7279 which was approved on March 24, 1992 and published in the March 28, 1992 issue of the Philippine Times Journal and Malaya , newspapers of general circulation. It appears that the Community Mortgage Program (CMP) is a mortgage financing program of the National Home Mortgage Finance Corporation (NHMFC) which assists legally organized associations of underprivileged and homeless citizens to purchase and develop a tract of land under the concept of community ownership; that through a Letter-Guaranty by said Government Financing Institution the landowner executes a Deed of Sale to the Association which stands as the borrower and debtor to the extent of the total amount paid by NHMFC to the landowner; that in the instant case, the property being sold to the Guadalupe Subdivision Neighborhood Association, Inc. is covered by TCT Nos. T-20564 and T-20565 of the Registry of Deeds of San Pablo City; that the said transaction was certified by the Housing and Urban Development Coordinating Council as an approved project under the Community Mortgage Program (CMP) of the government. cdtech Field verification conducted in this case disclosed that the beneficiaries are registered members of the Guadalupe Subdivision Neighborhood Association, Inc.; and that a total of 23,660 square meters of residential lots were sold and occupied by 155 families. In reply, please be informed that pursuant to Section 32 of R.A. 7279, pertinent portion of which reads: "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 xxx xxx xxx the landowners who sell their property to the Tenant's Association pursuant to the Community Mortgage Program are exempt from the payment of capital gains tax and from the expanded withholding tax under Revenue Regulations No. 1-90. Upon the sale thereof, the capital gains realized by the owner shall be exempt from the capital gains tax pursuant to the aforequoted provision of R.A. 7279, otherwise known as the Urban Development and Housing Act of 1992. Such being the case, the sale to the Guadalupe Subdivision Neighborhood Association, Inc. is exempt from the capital gains tax and the expanded withholding tax. However, it is observed that documentary stamp tax is not one of the taxes covered by the tax exemption clause under Sections 20 and 32 of R.A. 7279. Such being the case, you are liable to pay the documentary stamp tax on the document conveying the property to the Association under the CMP as imposed under Section 196 of the Tax Code, as amended, based on the actual consideration paid by the Association to you as the landowner. LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue