BIR Ruling No. 333-15

October 7, 2015 BIR RULING NO. 333-15 Sec. 32, RA No. 7279; BIR Ruling No. 109-13; BIR Ruling No. 304-13 Recomville I Homeowners' Association, Inc. Ph. 1-B Recomville I, Brgy. 170, Deparo, Caloocan City Attention: Lily T. Tadle President Gentlemen : This refers to the letter of Eduardo T. Manicio, Executive Vice President of the Social Housing Finance Corporation (SHFC) dated June 4, 2015, endorsing the sale transaction between Inter-Urban Developers, Inc. and Recomville I Homeowners' Association, Inc. Ph. 1-B 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 Inter-Urban Developers, Inc. (TIN 000-914-278-000) (hereinafter referred to as Landowner) is the registered owner of a parcel of land, identified as Lot 638, Tala Estate, LRC (GLRO) Record No. 6563 covered by Transfer Certificate of Title (TCT) No. T-87876 issued by the Registry of Deeds for the Metro Manila District III. The aforesaid property is situated at Barrio Road, Brgy. 170, Caloocan City with an area of Fifteen Thousand Three Hundred Eighty Six square meters (15,386 sq.m.), more or less. Recomville I Homeowners' Association, Inc. Ph. 1-B (TIN 297-977-761-000), on the other hand, is a homeowner's organization duly registered with the Housing and Land Use Regulatory Board (HLURB). On March 24, 2015, the parties executed a Deed of Absolute Sale whereby the Landowner transferred and conveyed Three Thousand Six Hundred Seventy One square meters (3,671 sq.m.) portion of the subject property to Recomville I Homeowners' Association, Inc. Ph. 1-B at an agreed price of Six Million Seven Hundred Ninety One Thousand Three Hundred Fifty Pesos (P6,791,350.00). Pursuant to the certification issued by SHFC, 3,671 sq.m. out of 15,386 sq.m. covered by TCT No. T-87876 actually comprise a Community Mortgage Program (CMP) Project and shall be proportionately distributed to the association's qualified member-beneficiaries. 1 For this purpose, Recomville I Homeowners' Association, Inc. Ph. 1-B 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. AIDSTE In support of its request, Recomville I Homeowners' Association, Inc. Ph. 1-B 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 3,671 sq.m. portion of the subject property qualify and is actually a CMP project; 3) SHFC Letter-Guaranty No. 1073; 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, Inter-Urban Developers, Inc. to Recomville I Homeowners' Association, Inc. Ph. 1-B of the 3,671 sq.m. out of 15,386 sq.m. covered by TCT No. T-87876 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 3,671 sq.m. out of 15,386 sq.m. covered by TCT No. T-87876 by the landowner to Recomville I Homeowners' Association, Inc. Ph. 1-B 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 Recomville I Homeowners' Association, Inc. Ph. 1-B Recomville I, Brgy. 170, Deparo, Caloocan City Name of Beneficiary Blk. Lot Total Area No. No. (sq.m.) 1 Marquez, Ria Ginga 9 1 40.91 2 Bautista, April Rose Fajardo 9 2 39.74 3 Hernandez, Hernan Rico 9 3 40.91 4 Refuerzo, Andrea Malang 9 4 40.91 5 Pimentel, Susan Campos 9 5 40.91 6 Cajis, Aloha Refuerzo 9 6 51.42 7 Perez, Valerio Cusi 9 7 56.10 8 Pucan, Rommel Galiza 10 1 44.41 9 Carino, Divina Gracia Pucan 10 2 44.41 10 Noveno, Francis Dela Torre 10 3 40.91 11 Sarmiento, Rommel Victoria 10 4 40.91 12 Manalo, Lourivic Noveno 10 5 40.91 13 Sarmiento, Archie Victoria 10 6 40.91 14 De Leon, Brix Paquil 10 7 40.91 15 Bacal, Christine Sison 10 8 40.91 16 Superticioso, Marissa Octaviano 10 9 40.91 17 Bacal, Omar Sison 10 10 40.91 18 Araojo, Randy Garay 10 11 40.91 19 Quelengen, Hermocillo Pabor 10 12 40.91 20 Gaviola, Cristine Superticioso 10 13 40.91 21 Dimalanta, Kathleen Superticioso 10 14 40.91 22 Tadle, Lily Tabon 10 15 40.91 23 Romasanta, Vanessa Angelica Cario 10 16 40.91 24 Tayong, Mark Anthony Reyes 10 17 40.91 25 Estavillo, Jr., Judy Tayong 10 18 40.91 26 Pucan, Ma Suerte Galiza 10 19 40.91 27 Dizon, Oliver Joy Quiachon 10 20 40.91 28 Sacramento, Federico Lasungan 14 1 40.91 29 Judaya, Catherine Rubio 14 2 33.89 30 Marano, Maricel Sawali 14 3 40.91 31 Gabagat, Angelita Alvaro 14 4 35.06 32 Nevado, Ma. Socorro Bautista 14 5 40.91 33 Gabagat, Jonalita Alvaro 14 6 35.06 34 Bautista, Sarah Le Aguas 14 7 40.91 35 Manalo, Alejandro Perez 14 8 35.06 36 Irudistan, Rolly Santiago 14 9 40.91 37 Javelosa, Mareicel Andres 14 10 35.06 38 Irudistan, Danilo Santiago 14 11 42.07 39 Perez, Lorenzo Cusi 14 12 31.56 40 Flegueras, Rofel Llonoso 14 13 39.74 41 Anonuevo, Lilibeth Lucena 14 14 39.74 42 Aristotole, Alelie Saludares 14 15 33.89 43 Garados, Erlinda Concepcion 14 16 40.91 44 Chiu, Rachel Urquiola 14 17 40.91 45 Maligsay, Ryan Dela Cruz 14 18 40.91 46 Cosme, Raymark Quiatchon 14 19 40.91 47 Miranda, Rosanna Lorenzo 14 20 40.91 48 Vallega, Ruben Gama 14 21 40.91 49 Lorenzo, Daniel Parafina 14 22 40.91 50 Pascual, Elma Dela Cruz 14 23 40.91 51 Frias, Roy Datuin 14 24 40.91 52 Solestre, Maria Frias 14 25 35.06 53 Murillo, Donna Tobias 15 1 40.91 54 Murillo, Dondon Tobias 15 2 39.74 55 Baloaloa, Mary Kristine Ablaza 15 3 40.91 56 Odarve, Raul Culada 15 4 40.91 57 Ablaza, Angelita Novesteras 15 5 40.91 58 Cabales, Rosita Huertas 15 6 40.91 59 Mangaluz, Arnel Sula 15 7 40.91 60 Panchita, Maribel Palomero 15 8 40.91 61 Dela Cruz, Michelle Abella 15 9 40.91 62 Balabat, Venancia Beoyo 15 10 40.91 63 Tayo, Albert Talamor 15 11 43.24 64 Pajaron, Erwin Cabaez 15 12 44.41 65 Dumaguing, Roselle Buda 20 1 40.91 66 Bico, Regie Gunio 20 2 39.74 67 Ytang, Arnold Santos 20 3 40.91 68 Bico, Helen Leonor 20 4 40.91 69 Ursal, Jannes Molina 20 5 40.91 70 Rucio, Rochelle Nolasco 20 6 40.91 71 Conde, Virgilio Nuez 20 7 40.91 72 Lorenzo, Rhoda Parafina 20 8 40.91 73 Paculan, Norman Llamas 20 9 40.91 74 Oquendo, Maribel Gutierrez 20 10 40.91 75 Lorenzo, Rowena Parafina 20 11 40.91 76 Guijo, Jr., Juan Labrador 20 12 40.91 77 Rueda, Rachel Ferrer 20 13 37.40 78 Guiatao, Jeffrey Cureg 21 1 40.91 79 Guiatao, Luz Cureg 21 2 39.74 80 Mingao, Clemente Roxas 21 3 40.91 81 Lorenzo, Jr., Reynaldo Parafina 21 4 40.91 82 Raquepo, Brando Cruz 21 5 40.91 83 Gonzaga, Michelle Lombres 21 6 40.91 84 Flegueras, Andres Garas 21 7 40.91 85 Del Sison, Jhomel Galicia 21 8 40.91 86 Rayanon, Jr., Melanin Torreon 21 9 40.91 87 Reyes, Ernesto Dela Cruz 21 10 40.91 88 Tatad, Olivia Cruz 21 11 45.58 89 Gebone, Diana Grace Velasco 21 12 45.58 90 Silladilla, Jerwin Santos 21 13 44.41 Footnotes 1. See Annex for the masterlist of qualified beneficiaries.