BIR Ruling No. 331-15

October 7, 2015 BIR RULING NO. 331-15 RA No. 7279; BIR Ruling No. 109-13; BIR Ruling No. 304-13 Sitio Mahayag Homeowners Assn., Inc. Sitio Mahayag, San Isidro, Talisay City Attention: Celso A. Cuerpo President Gentlemen : This refers to the letter of Ma. Ana R. Oliveros, President of Social Housing Finance Corporation (SHFC) dated April 23, 2015, endorsing the sale transaction between City of Talisay, Cebu and Sitio Mahayag Homeowners Assn., 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". Documents submitted disclose that City of Talisay, Cebu (TIN: 000-540-168-000) (hereinafter referred to as Landowner) is the registered owner of a parcel of land, identified as Lot 2109, Flr-133 of the Tal-Ming. Estate, Cebu, GLRO Rec. No. 3732 covered by Transfer Certificate of Title (TCT) No. T-152114 issued by the Registry of Deeds for the Province of Cebu. The aforesaid property is situated at Brgy. San Isidro, Talisay City, Cebu with an area of One Thousand Five Hundred Sixty Five square meters (1,565 sq.m.), more or less. Sitio Mahayag Homeowners Assn., Inc. (TIN: 435-175-041-000), on the other hand, is a homeowner's organization registered with the Housing and Land Use Regulatory Board (HLURB). On July 29, 2013, the parties executed a Deed of Absolute Sale whereby the Landowner transferred and conveyed One Thousand Five Hundred and 30/100 square meters (1,500.30 sq. m.) portion of the subject property to Sitio Mahayag Homeowners Assn., Inc. at an agreed price of One Million One Hundred Seven Thousand Two Hundred Six and 63/100 Pesos (P1,107,206.63) under Community Mortgage Program (CMP) of the SHFC. Pursuant to the certification issued by SHFC, 1,500.30 out of 1,565 sq. m. covered by TCT No. T-152114 actually comprise a CMP Project and shall be proportionately distributed to the association's qualified member-beneficiaries. 1 For this purpose, Sitio Mahayag Homeowners Assn., 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. CHTAIc In support of its request, Sitio Mahayag Homeowners Assn., Inc. has completely submitted on May 8, 2015 the following documents: 1) SHFC letter application for tax exemption; 2) Certification of the President of the SHFC that the subject properties actually comprise a CMP project; 3) Certified true copy of the Letter-Guaranty; 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 CMD shall be granted with the following privileges or incentives: (a) Government-owned or -controlled corporations and local government units, may dispose of their idle lands suitable for socialized housing under the CMP through negotiable sale at prices based on acquisition cost plus financial carrying costs; (b) Properties sold under the CMP shall be exempted from the capital gains tax; and" the landowner who sold its property 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 to Sitio Mahayag Homeowners Assn., Inc. of the 1,500.30 out of 1,565 sq. m. covered by TCT No. T-152114 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 properties, to the effect that the said properties 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 landowner is liable to pay the documentary stamp tax on the documents conveying the afore-stated properties imposed under Section 196 of the Tax Code of 1997, based on the consideration contracted to be paid for such realty or its fair market value determined in accordance with Section 6 (E) of the said Code, whichever is higher. 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 1,500.30 out of 1,565 sq. m. covered by TCT No. T-152114 by the landowner to Sitio Mahayag Homeowners Assn., Inc. is exempt from the imposition of VAT. (BIR Ruling No. 304-2013 dated August 6, 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 seller is entitled to exemption from capital gains tax or income tax imposed under the Tax Code of 1997. 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 Sitio Mahayag Homeowner's Assn., Inc. Sitio Mahayag, San Isidro, Talisay City Name of Beneficiary Blk. Lot Total Area No. No. (sq.m.) 1 Abing, Wilfredo C. 1 1 50.05 2 Chavez, Alexander R. 1 2 53.71 3 Chavez, Alyanna Jane A. 1 3 25.64 4 De Guzman, Noel T. 1 5 45.17 5 Cuaton, Kent C. 1 7 67.14 6 Cuaton, Eluardo C. 1 8 24.41 7 Ebina, Ricky C. 1 9 76.91 8 Bulambot, Aisadura May S. 2 1 84.23 9 Busi, Liza V. 2 2 52.49 10 Campo,Marilou A. 2 3 64.70 11 Chavez, Joelito A. 2 4 68.36 12 Cuerpo, Celso R. 2 6 64.70 13 Cuerpo, Judy O. 2 7 52.49 14 Allego, Isidro Jr. C. 2 9 45.17 15 Dales, Meryl T. 3 1 35.40 16 Tarnate, Jovy C. 3 2 42.73 17 Bascon, Rodrigo C. 3 3 19.53 18 Ambalate, Maximo I. 3 4 35.40 19 Cabo, Mario A. 3 5 30.52 20 Cuerpo, Micheal Angelo G. 3 6 31.74 21 Quiapo, Manuel A. 3 7 46.39 22 Negre, Sammy D. 3 8 37.84 23 Maturan, Bernadette A. 3 9 28.08 24 Embalzado, Ruben S. 3 10 36.62 25 Labuca, Leny C. 3 11 69.58 26 Maturan, Jesusa A. 3 12 65.92 27 Tabliga, Jerselo A. 3 13 95.22 28 Dela Cerna, Milagros S. 3 14 34.18 29 Dela Cerna, Elma C. 3 15 42.73 30 Barco, Nerissa N. 3 16 35.40 31 Dela Cerna, Romeo N. 3 17 37.84 Footnotes 1. See Annex for the masterlist of qualified beneficiaries.