BIR Ruling No. 324-15

October 7, 2015 BIR RULING NO. 324-15 Sec. 32, RA No. 7279; BIR Ruling No. 109-13; BIR Ruling No. 304-13 Bigkis Diwa Homeowners' Association, Inc. Phase I Culasi St., Group 2, Area B Brgy. Payatas, Quezon City Attention: Sally H. Delos Santos President Gentlemen : This refers to the letter of Eduardo T. Manicio, Executive Vice President of the Social Housing Finance Corporation (SHFC) dated June 5, 2015, endorsing the sale transaction between Kanejin Corporation and Bigkis Diwa Homeowners' Association, Inc. Phase I 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 Kanejin Corporation (TIN 000-357-236-000) (hereinafter referred to as Landowner) is the registered owner of a parcel of land, identified as Lot 57-F-3 of the subd. plan Psd-00-063777, being a portion of Lot 57-F (LRC) Psd-25408, LRC Rec. No. 1131 covered by Transfer Certificate of Title (TCT) No. N-274848 issued by the Registry of Deeds for Quezon City. The aforesaid property is situated at Brgy. Payatas, Quezon City with an area of Five Thousand Five Hundred Twenty square meters (5,520 sq.m.), more or less. Bigkis Diwa Homeowners' Association, Inc. Phase I (TIN 226-500-540-000), on the other hand, is a homeowner's organization duly registered with the Housing and Land Use Regulatory Board (HLURB). On May 15, 2015, the parties executed a Deed of Absolute Sale whereby the Landowner transferred and conveyed Three Thousand Seven Hundred Seventy One square meters (3,771 sq.m.) portion of the subject property to Bigkis Diwa Homeowners' Association, Inc. Phase I at an agreed price of Seven Million Five Hundred Forty Two Thousand Pesos (P7,542,000.00). Pursuant to the certification issued by SHFC, 3,771 sq.m. out of 5,520 sq.m. covered by TCT No. N-274848 actually comprise a Community Mortgage Program (CMP) Project and shall be proportionately distributed to the association's qualified member-beneficiaries. 1 For this purpose, Bigkis Diwa Homeowners' Association, Inc. Phase I 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. CAIHTE In support of its request, Bigkis Diwa Homeowners' Association, Inc. Phase I has completely submitted on June 19, 2015 the following documents: 1) SHFC letter application for tax exemption; 2) Certification of the President of the SHFC that 3,771 sq.m. portion of the subject property qualify and is actually a CMP project; 3) SHFC Letter-Guaranty No. 1081; 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; 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 landowner who sold its properties under CMP 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, Kanejin Corporation to Bigkis Diwa Homeowners' Association, Inc. Phase I of the 3,771 sq.m. out of 5,520 sq.m. covered by TCT No. N-274848 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. 32 of RA 7279. Accordingly, the landowners are liable to pay the documentary stamp tax on the document 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 realties or their fair market values 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 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. 109-13 dated March 21, 2013) 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 3,771 sq.m. out of 5,520 sq.m. covered by TCT No. N-274848 by the landowner to Bigkis Diwa Homeowners' Association, Inc. Phase I is exempt from the imposition of VAT. (BIR Ruling No. 304-2013 dated August 6, 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 sellers are entitled to exemption from capital gains tax or income tax imposed under Sec. 24 (D) (1) the Tax Code of 1997, as amended. 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 Bigkis Diwa Homeowner's Association, Inc. Phase I Culasi St., Group 2, Area B, Brgy. Payatas, Quezon City Name of Beneficiary Blk. No. Lot No. Total Area (sq.m.) 1 Manalo, Marites Candelario 1 1 52.18 2 De Lumen, Candida Derilo 1 2 36.52 3 Aclan, Nenita Derilo 1 3 36.52 4 De Lumen, Cylp Timothy Derilo 1 4 36.52 5 Sayambong, Danny Ignacio 1 5 28.70 6 Adao, Bernard Naputo 1 6 27.39 7 Morales, Leobert Quinisio l 7 32.61 8 Manalo, Jane Candelario 1 8 32.61 9 Valiente, Ma. Rowena Tesalona 1 9 39.13 10 Vale, Roerl Mark Llmazares 1 10 39.13 11 De Los Santos, Julio Gervacio 1 11 39.13 12 Tesalona, Iluminada Dupaya 2 1 44.35 13 Tesalona, Jovita Dupaya 2 2 40.44 14 Tesalona, Ricarte Dupaya 2 3 46.96 15 Tesalona, Cristopher Licuanan 2 4 45.65 16 Regunton, Allan Diaz 2 5 50.87 17 Delos Santos, Sally Hermosura 2 6 30.00 18 Delos Santos, Victor Sison 2 7 37.83 19 Delos Santos, Rolando Gervacio 2 8 37.83 20 Valiente, Ruel Roma Cruz 2 9 39.13 21 Valiente, Rogelio Jr. Roma Cruz 2 10 39.13 22 Valiente, Ronnie Roma Cruz 2 11 39.13 23 Valiente, Rhea Tesalona 2 12 39.13 24 Ramos, Donata Tesalona 2 13 74.35 25 Extremadura, Janet Hermosura 3 1 45.65 26 Hermosura, Joel Arcena 3 2 43.04 27 Cuerdo, Ernesto Jr. Lioc 3 3 54.78 28 Cuerdo, Anthony Lioc 3 4 57.39 29 Aficial, Arlyn Lucido 3 5 52.18 30 Lucido, Joel Tapia 3 6 48.26 31 Cuerdo, Josefa Lioc 3 7 56.09 32 De Guzman, Marilyn Morata 3 8 57.39 33 Hermosura, Melba Arcena 3 9 41.74 34 Hermosura, Jonas Arcena 3 10 45.65 35 Lopo, Anthony Albert Bacud 5 1 44.35 36 Lopo, Keth Marvin Bacud 5 2 32.61 37 Flores, Elvie Pasinabo 5 3 95.22 38 Valenciano, Melodina Napalit 5 4 49.57 39 Valenciano, Mary Joy Napalit 5 5 50.87 40 Cortina, Nio Pasinabo 5 6 39.13 41 Flores, Ernesto Jr. Pasinabo 5 7 39.13 42 Flores, Maricar Pasinabo 5 8 39.13 43 Liwanag, Jonathan Cultivo 5 9 37.83 44 Sablada, Jennie Agas 5 10 50.87 45 Dela Vega, Daisy Puntal 5 11 50.87 46 Pepe, Jenitte Tolentino 5 12 50.87 47 Espares, Arce Decipolo 5 13 62.61 48 Espares, Anthony Decipolo 5 14 50.87 49 Espares, Aquino Decipolo 5 15 50.87 50 Ditaonon, Lorielyn Villa 5 16 50.87 51 Gayamo, May Cuerdo 5 17 53.48 52 Hernani, Annabel Valdez 5 18 48.26 53 Valdez, Leonardo Beron 5 19 50.87 54 Hernani, Genieva Ann Valdez 5 20 49.57 55 Ahig, Rosalita Senangote 6 1 31.31 56 Marchan, Jomel Rey Ahig 6 2 31.31 57 Marchan, Miljhon Ahig 6 3 37.83 58 Ahig, Florinda Senangote 6 4 37.83 59 Grajo, Joel Arlie Bolor 6 6 39.13 60 Enriquez, Tomy Trader Carreon 6 7 39.13 61 Enriquez, Hershey Traze Carreon 6 8 39.13 62 Enriquez, Ernesto Balaguer 6 9 63.92 63 Alcayde, Fabiano Yucaran 6 10 39.13 64 Vizarra, Rosenie Grajo 6 11 45.65 65 Dacanay, Stefanie Canda 6 12 45.65 66 Mangondato, Ma. Cynthia Soriano 7 1 46.96 67 Mangondato, Aisa Angeli Soriano 7 2 44.35 68 Mangondato, Adelroyce Soriano 7 3 50.87 69 Marchan, Lily Ann Marchan 7 4 37.83 70 Soriano, Ramil Marchan 7 5 37.83 71 Ramos, Evangeline Soriano 7 6 37.83 72 Cabigting, Fernando Manabat 7 8 67.83 73 Cabigting, Jennifer Madayag 7 9 52.18 74 Cabigting, Jackieline Madayag 7 10 52.18 75 Cabigting, Alwyn Madayag 7 11 57.39 76 Verzosa, Raymundo Madayag 7 12 43.04 77 Hizon, Rosalyn Verzosa 7 13 52.18 78 Verzosa, Renato Jr. Madayag 7 14 52.18 79 Mariano, Mc Kenneth Cabigting 7 15 49.57 80 Grajo, Jovito Bolor 7 17 40.44 81 Sablan, Dennis Ragadao 7 18 50.87 82 Pura, Jonnel Estinor 7 19 37.83 83 Gorra, Edmar Reyes 7 20 44.35 Footnotes 1. See Annex for the masterlist of qualified beneficiaries.