BIR Ruling No. 334-15

October 7, 2015 BIR RULING NO. 334-15 RA No. 7279; BIR Ruling No. 109-13; BIR Ruling No. 304-13 Caneba Homeowners Association, Inc. Sitio Caneba, Brgy. Cansojong, Talisay City Attention: Rosalie Santos President Gentlemen : This refers to the letter of Ma. Ana R. Oliveros, President of Social Housing Finance Corporation (SHFC) dated May 7, 2015, endorsing the sale transaction between City of Talisay, Cebu and Caneba 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". 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 1391 of the Talisay-Minglanilla Estate, G.L.R.O. Rec. No. 3732 covered by Transfer Certificate of Title (TCT) No. 102-2012005215 issued by the Registry of Deeds for Cebu, Cebu. The aforesaid property is situated at Brgy. Cansojong, Talisay City, Cebu with an area of Three Thousand Four Hundred Sixty Six square meters (3,466 sq.m.), more or less. Caneba Homeowners Association, Inc. (TIN: 454-339-827-000), on the other hand, is a homeowner's organization registered with the Housing and Land Use Regulatory Board (HLURB). On December 27, 2012, the parties executed a Deed of Absolute Sale whereby the Landowner transferred and conveyed Three Thousand Three Hundred Twenty Three and 54/100 square meters (3,323.54 sq. m.) portion of the subject property to Caneba Homeowners Association, Inc. at an agreed price of Four Million Seven Hundred Seven Thousand Six Hundred Twenty Eight and 23/100 Pesos (P4,707,628.23) under Community Mortgage Program (CMP) of the SHFC. Pursuant to the certification issued by SHFC, 3,323.54 out of 3,466 sq. m. covered by TCT No. 102-2012005215 actually comprise a CMP Project and shall be proportionately distributed to the association's qualified member-beneficiaries. 1 For this purpose, Caneba 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. CAIHTE In support of its request, Caneba Homeowners Association, Inc. has completely submitted on May 15, 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 CMP 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 or 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 Caneba Homeowners Association, Inc. of the 3,323.54 out of 3,466 sq. m. covered by TCT No. 102-2012005215 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 3,323.54 out of 3,466 sq. m. covered by TCT No. 102-2012005215 by the landowner to Caneba Homeowners Association, 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 Caneba Homeowners Association, Inc. Sitio Caneba, Brgy. Cansojong, Talisay City Name of Beneficiary Blk. Lot Total Area No. No. (sq.m.) 1 Satore, Junrey 1 1 64.75 2 Caeda, Benjie 1 2 64.75 3 Hernando, Arielito 1 3 71.23 4 Daan, Angelita B. 1 4 72.85 5 Velez, Jefferson Fhil/Ma. Lourdesita 1 5 63.14 6 Hernando, Nimpha C. 1 6 72.85 7 Racaza, Joecita A. 1 7 69.61 8 Dela Pea, Joselito D. 1 8 51.80 9 Yukot, Teolan 1 9 51.80 10 Rabadon, Felix 1 10 51.80 11 Ondos, Dennis E. 1 11 51.80 12 Lopez, Fernando Sr. G. 1 12 51.80 13 Casaje, Jose Jr. M. 1 13 51.80 14 Lapena, Jason 1 14 51.80 15 Oberes, Vicente/Maria Wence 1 15 51.80 16 Hernando, Juvelando 1 16 51.80 17 Hernando, Eduardo 1 17 51.80 18 Sabellano, Dennis T. 1 18 71.23 19 Bazar, Edmundo 1 19 66.37 20 Bacus, Ronald O. 1 20 56.66 21 Racaza, Brian Rey E. 1 21 56.66 22 Santos, Jayson B. 1 22 56.66 23 Racaza, Josefina 1 23 82.56 24 Galo, Jay 1 24 56.66 25 Oberes, Ritche R./Rosalia M. 1 25 56.66 26 Melecio, Russell/Liezle 2 1 74.47 27 Barona, Lebirato Jr. 2 2 72.85 28 Santos, Felipe/Rosalie 2 3 74.47 29 Lariosa, Lucilyn (single) 2 5 77.71 30 Felisarta, Corsino C. 2 6 59.90 31 Cellona, Joebert N. 2 7 59.90 32 Dela Pea, Rogelio C. 2 8 69.61 33 Sabejon, Antonia 2 9 69.61 34 Nopre, Jaime/Ferlyn 2 10 59.90 35 Siago, Bosamce/Geraldine 2 11 59.90 36 Bucao, Vicente B. 3 1 61.52 37 Rallos, Euteqio Jr. A. 3 2 61.52 38 Bacus, Vicente A. 3 3 71.23 39 Unde, Emmalou O. (separated) 3 4 71.23 40 Petalcorin, Fernando/Emerita 3 5 61.52 41 Bacus, Monico A./Merlinda D. 3 6 63.14 42 Felizarta, Ignacio E. 4 1 59.90 43 Labura, Glecerio Jr. A. 4 2 61.52 44 Cadiz, Macrina E. (widow) 4 3 71.23 45 Bacalso, Chilner V. 4 4 61.52 46 Cadiz, Owen 4 5 64.75 47 Morales, Romeo A. 4 6 76.09 48 Sabellano, Hipolito/Rebecca L. 5 1 63.14 49 Piedad, Antolin 5 2 56.66 50 Marbacias, Jimmy J. 5 3 56.66 51 Talaba, Sherwin B. 5 4 56.66 52 Talaba, Eladio B. 5 5 69.61 53 Arnoco, Nilo 5 6 56.66 Footnotes 1. See Annex for the masterlist of qualified beneficiaries.