BIR Ruling No. 304-13

August 6, 2013 BIR RULING NO. 304-13 RA No. 7279; BIR Ruling No. 130-10; BIR Ruling No. 040-10 Durisol Compound Homeowners Association Incorporated Pinalagad, Area 5, Malinta, Valenzuela City Attention: Enrico Macaspac President Gentlemen : This refers to the letter of Ma. Ana R. Oliveros, President of Social Housing Finance Corporation dated October 8, 2012, requesting tax exemption from the payment of Capital Gains Tax and other taxes in accordance with the Republic Act (R.A.) No. 7279, otherwise known as the Urban Development and Housing Act of 1992. It appears that Manila Fertilizer, Inc. with Tax Identification Number 000-372-283-000, is the registered owner of parcels of land covered by two (2) Transfer Certificates of Title (TCT), to wit: TCT No. Area (sq. m.) Tax Declaration No. V-103349 1 987 C-017-15997 V-104729 2 300 C-017-16451 1,287 ==== issued by the Registry of Deeds for the Valenzuela City. The aforesaid properties are situated at Brgy. Malinta, Valenzuela City. Durisol Compound Homeowners Association Incorporated, on the other hand, is a homeowner's organization registered with the Housing and Land Use Regulatory Board (HLURB) with Tax Identification No. 255-029-271-000. On July 26, 2012, the parties executed a Deed of Absolute Sale whereby the owner transfers and conveys the subject properties to Durisol Compound Homeowners Association Incorporated at an agreed price of Two Million Eight Hundred Eighty Nine Thousand Four Hundred Seventeen Pesos and Ninety Six Centavos (P2,889,417.96). Pursuant to a certification issued by Social Housing Finance Corporation, One Thousand Two Hundred Eighty Seven square meters (1,287 sq.m.) of the properties covered by TCT Nos. V-103349 and V-104729 are actually a CMP Project and shall be proportionately distributed to the association's qualified member-beneficiaries. 3 For this purpose, Durisol Compound Homeowners Association Incorporated secured a housing loan under the Community Mortgage Program (CMP), a financing assistance program of the Social Housing Finance Corporation (SHFC) a subsidiary of the National Home Mortgage Finance Corporation (NHMFC). HATICc In reply, please be informed that pursuant to Section 32 of R.A. 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 landowner to Durisol Compound Homeowners Association Incorporated of the aforestated properties 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 caused to 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. 130-10 dated December 1, 2010) 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 owner 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. Moreover, under Section 109 (1) (P) of the Tax Code, as amended by R.A. 9337, the sale of real properties utilized for low-cost and socialized housing as defined by R.A. No. 7279 shall be exempt from VAT, thus, the sale of the aforestated properties by Manila Fertilizer, Inc. to Durisol Compound Homeowners Association Incorporated are exempt from the imposition of VAT. cTEICD 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. 040-10 dated August 27, 2010) Notwithstanding the foregoing, the Bureau of Internal Revenue shall conduct verification and post-audit that the actual occupants of the properties transferred under the CMP are qualified beneficiaries and therefore, the sellers are 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. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue ANNEX Durisol Compound Homeowners Association Incorporated Pinalagad, Area 5, Malinta, Valenzuela City Blk. No. Lot Total Area Name of Beneficiary No. (sq.m.) 1 Arce, Marissa M. I 1 21.90 2 Arce, Gemma M. 2 21.90 3 Arce, Bellazenia A. 3 21.90 4 Arce, Rubina V. 4 21.90 5 Lacebal, Danilo Jr. B. 5 21.90 6 Bolima, Emma C. II 1 21.90 7 San Juan, Analyn M. 2 21.90 8 Cunanan, Ernesto M. 3 21.90 9 Ga-as, Joy A. 4 21.90 10 Letran, Annabel A. 5 21.90 11 Arce, Glecerio M. 6 21.90 12 Suico, Ruth G. 7 21.90 13 Aquino, Rowena A. 8 21.90 14 Manaois, Roselle C. 9 21.90 15 Cadiente, Richard C. 10 21.90 16 Gacos, Alvin G. III 1 40.14 17 Rebuldela, Rodrigo M. 2 24.32 18 Macaspac, Edward R. 3 24.32 19 Macaspac, Jomer R. 4 24.32 20 Villanueva, Rene Karlo M. 5 41.36 21 Laman, Ma. Lourdes P. 6 42.58 22 Arellano, Joel M. 7 24.32 23 Macaspac, Joan V. IV 1 31.63 24 Macaspac, Jennifer V. 2 31.63 25 Fernando, Rosalinda B. 3 30.41 26 Villanueva, Rolly D. 4 29.19 27 Calacag, Liwliwa M. 5 30.41 28 Evangelista, Gerolita A. 6 26.76 29 Guevara, Crisanto R. 7 41.36 30 Ladrillano, Jobert G. 8 42.58 31 Ladrillano, Jaymie G. 9 42.58 32 Ladrillano, Jamiely G. 10 43.79 33 Dagondon, Licerio Jr. R. V 1 25.55 34 Cortes, Mary Beth O. 2 25.55 35 Jagolino, Erlinda I. 3 24.32 36 David, Alvin G. 4 26.76 37 David, Teresita G. 5 27.97 38 Dagondon, Joseph R. 6 27.97 39 Dagondon, Joey R. 7 27.97 40 Cunanan, Lauro Jr. M. 8 29.19 41 Cunanan, Minador M. 9 24.32 42 Golondrina, Marlon P. 10 21.90 43 Manoos, Maryrose M. 11 20.68 44 Maligaya, Mark Angelo L. 12 20.68 45 Ladrillano, Juner G. VI 1 38.93 46 Bacud, Ricardo S. 2 30.41 47 Limzon, Shirley S. 3 14.60 Footnotes 1. Formerly TCT Nos. V-102850/T-509 and V-23610 (subdivided into four-TCT Nos. V-104516 [159 sq.m.], V-104517 [853 sq.m.], V-103349 [987 sq.m.] and V-103350 [74 sq.m.]. 2. Formerly TCT No. V-104517 (subdivided into two-TCT Nos. V-104729 [300 sq.m.] and V-104730 [553 sq.m.]. 3. See Annex for the masterlist of qualified beneficiaries.