BIR Ruling No. 323-15

October 7, 2015 BIR RULING NO. 323-15 RA 7279; BIR Ruling No. 473-2014; BIR Ruling No. 304-2013 FFJJ Construction 12, 2nd Batch, Block XI Notre Dame Village, Cotabato City Attention: Osmea Palanggalan President Gentlemen : This refers to your letter dated April 27, 2015 requesting issuance of Certificate of Tax Exemption for the socialized housing project under the Yolanda Housing Project located at Brgy. San Rafael, Patnongon, Antique pursuant to Republic Act (R.A.) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". Documents submitted show that Anita A. Cagalawan (hereinafter referred to as Landowner) is the registered owner of a parcel of land with an area of Sixty Thousand One Hundred Sixty Six square meters (60,166 sq.m.), identified as Lot No. 6016, Case 26, Cad. 756-D, Patnongon Cadastre situated at Brgy. San Rafael, Patnongon, Antique and covered by Original Certificate of Title (OCT) No. P-41378 issued by the Registry of Deeds for Antique. On April 16, 2015, the parties executed a Deed of Absolute Sale whereby the Landowner, with the consent of her husband Virgilio Cagalawan, transferred and conveyed Forty Five Thousand Fifty Three square meters (45,053 sq.m.) portion of the subject property to National Housing Authority (NHA) (TIN: 000-916-384-012) at an agreed price of Six Hundred Thousand Pesos (P600,000.00). The above described property has been identified and certified for development into a residential project under the Yolanda Permanent Housing Program intended for the families affected by Typhoon Yolanda and qualified for housing assistance under R.A. No. 7279. The NHA has issued a Notice of Award dated October 24, 2014 to FFJJ Construction for the " Procurement of Fully Developed Lots and Completed Housing Units under the NHA's Yolanda Housing Program located at San Rafael, Patnongon, Antique-631 Housing Units " with a contract price of One Hundred Eighty Two Million Eight Hundred Seventy Thousand Nine Hundred Seventy Nine and 20/100 Pesos (P182,870,979.20). aDSIHc 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. "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) . . . (2) Capital Gains Tax;" xxx xxx xxx" The landowner who sells his property for use in a socialized housing project is exempt from the payment of the capital gains tax. Such being the case, the sale by Anita A. Cagalawan to NHA of the 45,053 sq.m. out of 60,166 sq.m. covered by OCT No. P-41378 is exempt from capital gains tax. (BIR Ruling No. 473-2014 dated November 24, 2014) Moreover, pertinent portions of Revenue Memorandum Circular (RMC) No. 42-01 dated October 5, 2001, provide that: 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 The exemption from documentary stamp tax of NHA in connection with any of its socialized housing project 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. Accordingly, the sale transaction executed by Anita A. Cagalawan in favor of the NHA of the 45,053 sq.m. out of 60,166 sq.m. covered by OCT No. P-41378 are likewise exempt from documentary stamp tax imposed under Section 196 of the Tax Code of 1997, as amended. (BIR Ruling No. 036-2014 dated January 29, 2014) 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 real property covering 45,053 sq.m. out of 60,166 sq.m. covered by OCT No. P-41378 by the landowner to NHA for purposes of the Yolanda Permanent Housing Program is exempt from the imposition of VAT. (BIR Ruling No. 304-2013 dated August 6, 2013) Upon application for exemption, a lien on the title of the 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 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 transfer of the land 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 requirements provided under Revenue Memorandum Order (RMO) No. 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. ETHIDa Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue