BIR Ruling No. 329-15

October 7, 2015 BIR RULING NO. 329-15 RA No. 7279; BIR Ruling No. 053-15 San Roque II Homeowners Association, Inc. Purok Morado, Sitio Pilit, Cabancalan, Mandaue City Attention : Walter Flores President Gentlemen : This refers to the letter of Ma. Ana R. Oliveros, President of the Social Housing Finance Corporation (SHFC) dated June 30, 2015, endorsing the sale transaction between Naomi B. Garay and San Roque II 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''. SDAaTC Documents submitted disclose that Naomi B. Garay (TIN 266-481-956-000), married to Camilo G. Garay, (hereinafter referred to as Landowner) is the registered owner of a parcel of land, identified as "Lot 1094-B of the subdivision plan Psd-07-049772 being a portion of Lot 1094 II-5121 Amd. 2 Hda. Mandaue" covered by Transfer Certificate of Title (TCT) No. MR-3175 T(63866) issued by the Registry of Deeds for the Mandaue City. The aforesaid property is situated at Sitio Pilit, Cabancalan, Mandaue City with an area of One Thousand Six Hundred Seventy Five square meters (1,675 sq.m.), more or less. San Roque II Homeowners Association, Inc. (TIN 419-720-249-000), on the other hand, is a homeowner's organization duly registered with the Housing and Land Use Regulatory Board (HLURB). On June 8, 2015, the parties executed a Deed of Absolute Sale whereby the Landowner transferred and conveyed the subject property to San Roque II Homeowners Association, Inc. at an agreed price of Four Million Five Hundred Twenty Two Thousand Five Hundred Pesos (P4,522,500.00). Pursuant to the certification issued by SHFC, the subject property covered by TCT No. MR-3175 T(63866) is actually a Community Mortgage Program (CMP) Project and shall be proportionately distributed to the association's qualified member-beneficiaries. For this purpose, San Roque II 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, San Roque II Homeowners Association, Inc. has completely submitted on July 3, 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. CMP-0916; 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 TCTs and Latest Tax Declarations 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 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 Naomi B. Garay to San Roque II Homeowners Association, Inc. of the subject property covered by TCT No. MR-3175 T(63866) 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. 053-15 dated February 27, 2015) 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. 053-15 dated February 27, 2015) 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. 053-15 dated February 27, 2015) 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. acEHCD Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue ATTACHMENT SAN ROQUE II HOMEOWNERS ASSOCIATION, INC.Purok Morado, Sitio Pilit, Cabancalan, Mandaue City Name of Beneficiary Blk. No. Lot No. Total Area (sq.m.) 1 Pogado, Ivy S. 1 1 41.88 2 Cabaero, Aurelio A. 1 2 41.88 3 Suico, Leslie R. 1 3 41.88 4 Epile, Cepriano M. 1 4 41.88 5 Noel, Ronnel T. 1 5 41.88 6 Dinapo, Estrellita A. 1 6 41.88 7 Pagal, Jennileth Marie M. 1 7 41.88 8 Anud, Leonardo E. 1 8 41.88 9 Potot, Maria Arlina N. 1 9 41.88 10 Ceniza, Cherry S. 1 10 41.88 11 Ceniza, Christian S. 1 11 41.88 12 Baring, Obdulia H. 2 1 41.88 13 Noynay, Rudelia Q. 2 2 41.88 14 Macatulag, Alex A. 2 3 41.88 15 Nedamo, Chona C. 2 8 41.88 16 Mulle, Jose Remars V. 2 5 41.88 17 Flores, Walter P. 2 6 41.88 18 Vecada, Loida M. 2 7 41.88 19 Baga, Arlinda S. 2 6 41.88 20 Gozano, Marites D. 2 9 41.88 21 Antoni, Romeo Jr. R. 2 10 41.88 22 Sarong, Arthur C. 2 11 41.88 23 Paciencia, Ernesto Jr. N. 2 12 41.88 24 Buytrago, Alex A. 2 13 41.88 25 Arsolon, Francisco Jr. C. 2 14 41.88 26 Napoles, Lucille A. 2 15 41.88 27 Sarsalejo, John Mark C. 2 16 41.88 28 Pugoy, Ancielito M. 2 17 41.88 29 Tan, Marcyn A. 2 18 41.88 30 Cabaero, Mariano Jr. A. 3 1 41.88 31 Piala, Warlito A. 3 2 41.88 32 Almacen, Gerry O. 3 3 41.88 33 Cabatingan, Jomar A. 3 8 41.88 34 Cabatingan, Cecilia O. 3 5 41.88 35 Andales, Rodger C. 3 6 41.88 36 Caal, Marlaw D. 3 7 41.88 37 Esconde, Elverito M. 3 8 41.88 38 Madredios, Jenely O. 3 9 41.88 39 Villarin, Rosa B. 3 10 41.88 40 Jalandoni, Richard D. 3 11 41.88