BIR Ruling No. 326-15

October 7, 2015 BIR RULING NO. 326-15 Sec. 32, RA No. 7279; BIR Ruling No. 109-13 Bagong Pag-Asa Calbayog Homeowners Association, Inc. 536 Calbayog St.,Brgy. Highway Hills, Mandaluyong City Attention :Marietta A. Quinto President Gentlemen : This refers to the letter of Ma. Ana R. Oliveros, President of the Social Housing Finance Corporation (SHFC) dated May 18, 2015, endorsing the sale transaction between Ciriaco A. Reyes, Jr., married to Candida Torres Reyes, and Bagong Pag-Asa Calbayog Homeowners Association, Inc. 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''. HTcADC Documents submitted disclose that Ciriaco A. Reyes, Jr.,married to Candida Torres Reyes, (hereinafter referred to as Landowner) is the registered owner of a parcel of land, identified as Lot No. 17, Block 57 of the consolidation and subdivision plan, Pcs-2473, being a portion of the consolidation of Lot Nos. 1, 6, 7, 8, 9 & 10, Blk. 340; Lot Nos. 4, 5, 6, 9 to 21 inclusive of 23 & 24, Blk. No. 341; Lot Nos. 1 & 3 to 20 inclusive, Blk. No. 342, Lot Nos. 2, 3, 4, Blk. No. 343, Lot No. 5, Blk. No. 344, Lot No. 3. Blk. No. 345, Lot Nos. 2 to 7 inclusive, Blk. No. 346 & Road Lot Nos. 9, 10, 11, 13 & 14 described on plan Psd-3188, Lot 2-B, Blk. No. 342 described on Plan Psd-8550, Lot No. 1-B, Blk. No. 343 described on plan Psd-18249, Blk. No. 553, described on plan Pcs-834, Lot No. B-4-C-2-B, described on plan Psd-13254, Lot Nos. 14 & 15 described on plan Pcs-1057, Sheet 2 Lot No. 1, described on plan Pcs-2411, Lot No. 17-Q-7-E-1-D-2-B-31-P-3, described on plan Psd-13254, Lot No. 17-Q-7-E-1-D-2-B-31-P-1-F described on plan Psd-19658 & Lot No. 17-Q-7-E-1-D-2-B-30-J-4, described on plan Psd-19658, GLRO Rec. Nos. 699, 875 & 917 covered by Transfer Certificate of Title (TCT) No. 5316 issued by the Registry of Deeds for the Metro Manila District II. The aforesaid property is situated at Calbayog St.,Brgy. Highway Hills, Mandaluyong City with an area of Five Hundred Fifteen square meters (515 sq.m.),more or less. Bagong Pag-Asa Calbayog Homeowners Association, Inc. (TIN 005-285-925-000),on the other hand, is a homeowner's organization duly registered with the Housing and Land Use Regulatory Board (HLURB).On March 23, 2015, the parties executed a Deed of Absolute Sale whereby the Landowner transferred and conveyed the subject property to Bagong Pag-Asa Calbayog Homeowners Association, Inc. at an agreed price of Three Million Six Hundred Five Thousand Pesos (P3,605,000.00).Pursuant to the certification issued by SHFC, the subject property covered by TCT No. 5316 is actually a Community Mortgage Program (CMP) Project and shall be proportionately distributed to the association's qualified member-beneficiaries. 1 For this purpose, Bagong Pag-Asa Calbayog Homeowners Association, Inc. 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. In support of its request, Bagong Pag-Asa Calbayog Homeowners Association, Inc. has completely submitted on May 22, 2015 the following documents: 1) SHFC letter application for tax exemption; 2) Certification of the President of the SHFC that the subject property qualifies and is actually a CMP project; 3) SHFC Letter-Guaranty No. 1068; 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 his properties under CMP for use in a socialized housing project are exempt from the payment of capital gains tax. aScITE Such being the case, the sale by Ciriaco A. Reyes, Jr.,married to Candida Torres Reyes, to Bagong Pag-Asa Calbayog Homeowners Association, Inc. of the subject property covered by TCT No. 5316 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) 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 BAGONG PAG-ASA CALBAYOG HOMEOWNERS ASSOCIATION, INC.536 Calbayog St.,Brgy. Highway Hills, Mandaluyong City Name of Beneficiary Blk. No. Lot No. Total Area (sq.m.) 1 Sabellano, Violeta Baldo I 1 18.39 2 Daganio, Ma. Teresa Lebantancia I 2 18.39 3 Balbuena, Atillano Abayan I 3 18.39 4 Jadion, Meliton Ayhon I 4 18.39 5 Ayhon, Charlito Inciso I 5 18.39 6 Valdez, Mary Jane Damiar I 6 18.39 7 Pagaspas, Camilo Guino I 7 18.39 8 Abrugar, Rusalinda Tabunis I 8 18.39 9 Caalem, Benito Egargo I 9 18.39 10 Alamodin, Fatima Beronio I 10 18.39 11 Fontanilla, Marcial Ferrer I 11 18.39 12 Morales, Recardo Baldoza I 12 18.39 13 Agris, Rolando Jr. Cama I 13 18.39 14 Projilla, Pascualito Gabatbat I 14 18.39 15 Quinto, Marieta Abueva II 1 18.39 16 Campano, Lourdes Cabario II 2 18.39 17 Longatang, Aileen Ayhon II 3 18.39 18 Lebantacia, Mariel Sabellano II 4 18.39 19 Abueva, Jr. Fernando Arias II 5 18.39 20 Elecho, Jr. Leonardo Odevilas II 6 18.39 21 Gamalo, Crisanto Compendio II 7 18.39 22 Dela Cruz, Josephine Cabario II 8 18.39 23 Viegas, Arthur Almen II 9 18.39 24 Gatila, Jonathan Inciso II 10 18.39 25 Abrajano, Segundina Ayhon II 11 18.39 26 Biong, Gildo Arias II 12 18.39 27 Baguinang, Jessie Gamalo II 13 18.39 28 Ayhon, John Paul Atencio II 14 18.39 Footnotes 1. See Annex for the masterlist of qualified beneficiaries.