BIR Ruling No. 322-15

October 1, 2015 BIR RULING NO. 322-15 RA 7279; BIR Ruling No. 171-2015 Lak-K Builders Co. Units 606 & 609 Jocfer Bldg. Commonwealth Avenue, Quezon City Attention: Michael Angelo F. Kallos Vice President/General Manager Gentlemen : This refers to your letter dated June 24, 2015 requesting, on behalf of LAK-K BUILDERS CO., tax exemption on its sale to the National Housing Authority (NHA) of a parcel of land located at Barangay San Isidro (Suhi), Tacloban City, pursuant to Republic Act (RA) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". Documents submitted show that LAK-K BUILDERS CO., with Tax Identification Number 007-191-150-000, is the registered owner of a parcel of land covered by Transfer Certificate of Title (TCT) No. 122-2015000089 of the Registry of Deeds for Tacloban City, particularly described as follows: TCT NO. 122-2015000089 1 "A PARCEL OF LAND (LOT NO. 4417 OF THE CADASTRAL SURVEY OF TACLOBAN), SITUATED IN THE BARRIOS OF CABALAWAN AND CAWAYAN, MUNICIPALITY OF TACLOBAN . . . CONTAINING AN AREA OF TWENTY FIVE THOUSAND SIX HUNDRED AND THIRTY-SEVEN (25,637) SQUARE METERS, MORE OR LESS." On March 23, 2015, LAK-K BUILDERS CO. and the NHA (TIN: 000-916-384-012) executed a Deed of Absolute Sale whereby the former transferred and conveyed to the latter the above-described parcel of land for and in consideration of Three Million Two Hundred Seventy Thousand Pesos (P3,270,000.00). Based on the 1st Indorsement dated June 23, 2015 of the NHA, the above-described lot covered by TCT No. 122-2015000089 is being acquired by the NHA for the purpose of developing the same into a socialized housing project under the NHA's Yolanda Permanent Housing Program. In reply, please be informed that pursuant to Sections 19 and 20 of Republic Act (RA) No. 7279, pertinent portions of which state that: "Sec. 19. Incentives for the National Housing Authority . The National Housing Authority, being the primary government agency in charge of providing housing for the underprivileged and homeless, shall be exempted from the payment of all fees and charges of any kind, whether local or national, such as income and realty taxes. All documents or contracts executed by and in favor of the National Housing Authority shall also be exempt from the payment of documentary stamp tax and registration fees, including fees required for the issuance of transfer certificates of title. ICHDca "Sec. 20. Incentives for Private Sector Participating in Socialized Housing . To encourage greater private sector participation in socialized housing and further reduce the cost of housing units for the benefit of the underprivileged and homeless, the following incentives shall be extended to the private sector: xxx xxx xxx "(d) Exemption from the payment of the following: (1) Project-related income taxes; (2) Capital Gains Tax; (3) Value-added tax for the project contractor concerned." the landowner of properties who sells its properties for use in a socialized housing project is exempt from the payment of the capital gains tax. Accordingly, the sale by LAK-K BUILDERS CO. to NHA of the above-described parcel of land covered by TCT No. 122-2015000089, with an area of 25,637 square meters, is exempt from the capital gains tax. (BIR Ruling No. 171-2015 dated June 8, 2015) Moreover, pertinent portions of Revenue Memorandum Circular (RMC) No. 42-01 dated October 5, 2001, provide, viz. : xxx xxx xxx A. National Housing Authority (NHA) The NHA, being the primary government agency in charge of providing housing for the underprivileged and homeless citizens shall be exempted from the payment of the following national internal revenue taxes: (1) . . . (2) Documentary stamp tax on sales transactions executed by and in favor of the NHA in connection with socialized housing projects. Since Section 19 of R.A. 7279 exempts "all documents or contracts executed by and in favor of the NHA," the exemption from documentary stamp tax extends to the other party (either seller or buyer) that is dealing or transacting with the NHA. xxx xxx xxx It must be noted that the exemption from the documentary stamp tax of NHA, in connection with any of its socialized housing projects, extends to the other party (either seller or buyer) that deals or transacts with the NHA. Consequently, since NHA is a party to the sale, no documentary stamp tax shall be due on such sale, either on NHA or the party with which NHA is transacting. Accordingly, the sale by LAK-K BUILDERS CO. to NHA of the above-described parcel of land covered by TCT No. 122-2015000089, with an area of 25,637 square meters, is likewise, exempt from the payment of documentary stamp tax under Section 196 of the Tax Code of 1997, as amended. (BIR Ruling No. 171-2015 dated June 8, 2015) Moreover, under Section 109 (1) (P) of the Tax Code of 1997, 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 value-added tax (VAT), thus, the sale of the above-described parcel of land, with an area of 25,637 square meters, covered by TCT No. 122-2015000089, made by LAK-K BUILDERS CO. in favor of the NHA for purposes of the Yolanda Permanent Housing Program is exempt from the imposition of VAT. (BIR Ruling No. 171-2015 dated June 8, 2015) TCAScE Upon application for exemption, a lien on the title of the subject parcel of land shall be annotated by the Register of Deeds having jurisdiction over the property, to the effect that the same is to be applied or is being applied to a socialized housing project pursuant to RA 7279. Please take note that this ruling is never intended and shall not be construed as giving authority to the concerned Register of Deeds to effect the transfer of the 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) after the submission of the requirement provided under RMO 15-2003. 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 Footnotes 1. Formerly, OCT No. 22652 registered under the name of Graciano Rama, married to Susana Agner.