BIR Ruling No. 327-15

October 7, 2015 BIR RULING NO. 327-15 Sec. 32, RA No. 7279; BIR Ruling No. 109-13 Villa Adelina Reyes Homeowners Association, Inc. 536 Calbayog St. Brgy. Highway Hills, Mandaluyong City Attention: Evelyn A. Yaona President Gentlemen : This refers to the letter of Ma. Ana R. Oliveros, President of the Social Housing Finance Corporation (SHFC) dated March 23, 2015, endorsing the sale transaction between Ciriaco A. Reyes Jr. and Villa Adelina Reyes 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". HEITAD 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 16, 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, Block No. 340; Lot Nos. 4, 5, 6, 9 & 21 inclusive 23 & 24, Block 341; Lot Nos. 1 & 3 to 20 inclusive, Blk. 342; Lot Nos. 2, 3 & 4, Block No. 343; Lot No. 5, Block No. 344; Lot No. 3, Block 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 No. 2-B, Block No. 342 described on plan Psd-8550; Lot No. 1-B, Block 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-13154, Lot Nos. 14 & 15, described on 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 13254; Lot No. 17-Q-7-E-1-D-2-B-18, described on Plan Psd-9766; Lot No. 17-Q-7-E-1-D-2-B-31-P-8-F, described on plan Psd-19658 & Lot No. 17-Q-7-E-1-D-2-B-30-J-4, described on Psd-19658, GLRO Rec. Nos. 690, 875 & 917 covered by Transfer Certificate of Title (TCT) No. 5317 issued by the Registry of Deeds for the Metro Manila District II. The aforesaid property is situated at Calbayog St.,Hi-way Hills, Mandaluyong City with an area of Five Hundred Eleven square meters (511 sq.m.),more or less. Villa Adelina Reyes Homeowners Association, Inc. (TIN 417-321-919-000),on the other hand, is a homeowner's organization duly registered with the Housing and Land Use Regulatory Board (HLURB).On November 4, 2014, the parties executed a Deed of Absolute Sale whereby the Landowner transferred and conveyed the subject property to Villa Adelina Reyes Homeowners Association, Inc. at an agreed price of Three Million Five Hundred Seventy Seven Thousand Pesos (P3,577,000.00).Pursuant to the certification issued by SHFC, the subject property covered by TCT No. 5317 is actually a Community Mortgage Program (CMP) Project and shall be proportionately distributed to the association's qualified member-beneficiaries. 1 For this purpose, Villa Adelina Reyes 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 on February 20, 2015. In support of its request, Villa Adelina Reyes Homeowners Association, Inc. has completely submitted on March 27, 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. 1026; 4) Certified true copy of the Deed of Absolute Sale to the Community Association; 5) Certified true copies of the Certificate of Registration with HLURB/Articles of Incorporation of the Community Association and By-laws; 6) Certified true copy of the Masterlist of Qualified Beneficiaries duly certified by the SHFC; 7) Certified true copies of the TCT No. 5317 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 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, Ciriaco A. Reyes Jr.,married to Candida Torres Reyes, to Villa Adelina Reyes Homeowners Association, Inc. of the subject property covered by TCT No. 5317 is exempt from the capital gains tax. 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) 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) 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. ATICcS Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue ANNEX VILLA ADELINA REYES HOMEOWNERS ASSOCIATION, INC.536 Calbayog St. Brgy. Highway Hills, Mandaluyong City Name of Beneficiary Blk. No. Lot No. Total Area (sq.m.) 1 Yaona, Evelyn Abendano I 1 22.22 2 Elejido, Jinkie Ladan I 3 22.22 3 Labnao, Jovelyn Yaona I 4 22.22 4 Peralta, Malou Destajo I 5 22.22 5 Peralta, Mary Ann Belmonte I 6 22.22 6 Olido, Kris Lee Leynes I 7 22.22 7 Odonel, Miguel Martillano I 8 22.22 8 Oliveros, Danny Olido I 9 22.22 9 Avila, Abelyn Due I 10 22.22 10 Ecleo, Rosemarie Gaspe I 11 22.22 11 Paala, Edilberto Gahol I 12 22.22 12 Caalem, Mylen Peralta II 1 22.22 13 Jalova, Rosevi Sibayan II 2 22.22 14 Odonel, Butch Projella II 3 22.22 15 Deliola, Bimbo Navares II 4 22.22 16 Ecleo, Thelma Gacho II 5 22.22 17 Arceno, Romeo Baillo II 6 22.22 18 Caalem, Princess May Logronio II 7 22.22 19 Diasanta, Lorenzo Elejido II 8 22.22 20 Canlas, Joybell Sula I n 9 22.22 21 Partosa, Marissa Armada II 10 22.22 22 Sultan, Maria Arlene Jao II 11 22.22 23 Ecaldre, Ma. Kristina Cassandra Gabornes II 12 22.22 Footnotes 1. See Annex for the masterlist of qualified beneficiaries. n Note from the publisher: Copied verbatim from the official copy. Please check if I or II.