BIR Ruling No. 335-15

October 7, 2015 BIR RULING NO. 335-15 RA No. 7279; BIR Ruling No. 053-15 Villa Enrico Heights Homeowners' Association, Inc. Ph. 6 Pagaduan Subdivision, Brgy. 171, Bagumbong, Caloocan City Attention: Melinda A. Natividad President Gentlemen : This refers to the letter of Eduardo T. Manicio, Executive Vice President of the Social Housing Finance Corporation (SHFC) dated June 17, 2015, endorsing the sale transaction between Juanito R. Littaua and Villa Enrico Heights Homeowners' Association, Inc. Ph. 6 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 Juanito R. Littaua (TIN 110-641-941-000), married to Teresita Littaua, (hereinafter referred to as Landowner) is the registered owner of parcels of land covered by three (3) Transfer Certificates of Title (TCT): TCT No. Tax Declaration No. Lot No. Area (sq. m.) C-2113 113-25-171-50-033 Lot 4 474 C-2114 113-25-171-50-053 Lot 1 276 C-2115 113-25-171-50-054 Lot 2 280 total area 1,030 ===== both issued by the Registry of Deeds for the Metro Manila District III. The aforesaid properties are situated at Pagaduan Subdivision, Brgy. 171, Bagumbong, Caloocan City. Villa Enrico Heights Homeowners' Association, Inc. Ph. 6 (TIN 292-222-027-000), on the other hand, is a homeowner's organization duly registered with the Housing and Land Use Regulatory Board (HLURB). On April 27, 2015, the parties executed a Deed of Absolute Sale whereby the Landowner through his Attorney-in-Fact, Dionisio H. Littaua transferred and conveyed Eight Hundred Thirty Six square meters (836 sq.m.) portion of the subject properties to Villa Enrico Heights Homeowners' Association, Inc. Ph. 6 at an agreed price of Two Million Ninety Thousand Pesos (P2,090,000.00). Pursuant to the certification issued by SHFC, 836 sq.m. out of 1,030 sq.m. covered by TCT Nos. C-2113, C-2114 and C-2115 actually comprise a Community Mortgage Program (CMP) Project and shall be proportionately distributed to the association's qualified member-beneficiaries. 1 For this purpose, Villa Enrico Heights Homeowners' Association, Inc. Ph. 6 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. ETHIDa In support of its request, Villa Enrico Heights Homeowners' Association, Inc. Ph. 6 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 836 sq.m. portion of the subject properties qualifies and is actually a CMP project; 3) SHFC Letter-Guaranty No. 1089; 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 Juanito R. Littaua to Villa Enrico Heights Homeowners' Association, Inc. Ph. 6 of the 836 sq.m. portion out of 1,030 sq.m. covered by TCT Nos. C-2113, C-2114 and C-2115 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. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue ANNEX Villa Enrico Heights Homeowners' Association, Inc. Ph. 6 Pagaduan Subdivision, Brgy. 171, Bagumbong, Caloocan City Name of Beneficiary Blk. Lot Total Area No. No. (sq.m.) 1 Corsino, Almera Cortado 0 1 37.31 2 Natividad, Melinda Arro 0 2 38.69 3 Natividad, Rodeo Arro 0 3 38.69 4 Cagande, Nestor Laurente 0 6 38.69 5 Salvador, Laiza Mallorca 0 7 38.69 6 Amarile, Perilyn Belano 0 9 38.69 7 Tabilin, Nancy Novecio 0 10 40.07 8 Jumawan, Mylin Ybaez 0 11 37.31 9 Cortez, Juliet Docena 0 13 37.31 10 Rosete, Evelyn Tamayo 0 15 37.31 11 Viana, Jacqueline Bartolata 0 16 37.31 12 Dela Cruz, Alipio Tabula 0 17 37.31 13 Viana, Nila Bartolata 0 18 37.31 14 Pondevida, Erlinda Dela Cruz 0 19 37.31 15 Balasbas, Amy Salunga 0 20 38.69 16 Lomocso, Ronnie Pios 0 21 38.69 17 Paningbatan, Ferdinand Palmares 0 22 38.69 18 Lomocso, Alan Pios 0 23 38.69 19 Batis, Danilo Empas 0 25 38.69 20 De Castro, Anacito Mayuga 0 27 38.69 21 De Castro, Anna Marie Canda 0 28 35.93 22 De Castro, Anacito Ezekiel Torres 0 29 35.93 Footnotes 1. See Annex for the masterlist of qualified beneficiaries.