BIR Ruling No. 344-11

September 13, 2011 BIR RULING NO. 344-11 R.A. 7279; BIR Ruling No. 501-93; BIR Ruling No. DA-567-98; BIR Ruling No. SH-(110)710-09 Anak Puso Homeowner's Association, Inc. Lot 355 Brgy. San Vicente, San Pedro, Laguna Attention: Mr. Hector Z. Arcilla President Gentlemen : This refers to your letter dated March 29, 2010 requesting, on behalf of the seller, exemption from the payment of capital gains tax on the sale of two (2) parcels of land by Conchita F. Fabra in favor of Anak Puso Homeowner's Association, Inc. ("ANAK PUSO HOA" for brevity) pursuant to Republic Act 7279 otherwise known as the "Urban Development and Housing Act of 1992". aSIHcT Documents submitted disclose that Conchita F. Fabra (married to Benjamin P. Fabra), with Taxpayer's Identification No. 110-614-736, is the absolute and registered owner of two (2) parcels of land with the combined area of Nine Thousand Four Hundred Twenty Two (9,422) square meters and covered by the following Transfer Certificates of Title (TCT), more particularly described as follows: TCT No. Description/Location Area T-258995 Lot 355 B-7/San Vicente, San Pedro, Laguna 3,141 sq.m. T-195778 Lot 355-A/San Vicente, San Pedro, Laguna 6,281 sq.m. Total 9,422 sq.m. ========= all issued by the Registry of Deeds for Calamba; that the seller agreed to sell the above-described properties under the Community Mortgage Program (CMP) of the Social Housing Finance Corporation (SHFC) at a total agreed price of Eleven Million Four Hundred Eighty One Thousand One Hundred Seventy Eight and 10/100 (PhP11,481,178.10) Pesos; that the buyer, ANAK PUSO HOA, with Taxpayer's Identification No. 250-040-649, is a non-stock, non-profit association duly registered with the Housing and Land Use Regulatory Board (HLURB) with Registration No. 13475 dated January 13, 2007; that on March 2, 2011, a Deed of Absolute Sale was executed by Conchita F. Fabra over the aforementioned parcels of lands in favor of ANAK PUSO HOA; that said purchase by ANAK PUSO HOA of the properties secured by a housing loan under the CMP as certified by the SHFC to be a bona fide transaction and which qualifies for capital gains tax exemption under Section 32 of R.A. 7279; that the master-list of beneficiaries and loan apportionment submitted to the SHFC shows that there are One Hundred Sixty Five (165) member-beneficiaries (certified true copy of which is attached and is made an integral part of this ruling) ; and that ANAK PUSO HOA has already paid the documentary stamp tax (DST) due on the sale in the amount of PhP148,500.00 on March 1, 2011; In support of its request, ANAK PUSO HOA has completely submitted on March 3, 2011 the following documents: 1. Written Application for Exemption; 2. Duplicate Original of the Deed of Absolute Sale; 3. Certified copies of the Transfer Certificates of Title Nos. T-258995 & 195778; 4. Certified copies the Tax Declarations; 5. Photocopy of the DST Return and PNB BTR Deposit Slip; 6. Certification from the SHFC that the purchase of property qualifies under CMP; TICAcD 7. Copy of the Certificate of Registration of ANAK PUSO HOA with the HLURB; 8. Certified true copy of the Articles of Incorporation and By-laws of the ANAK PUSO HOA; 9. Certified true copy of the Masterlist of qualified beneficiaries; 10. BIR Certificate of Registration of ANAK PUSO HOA and TINs of spouses Conchita and Benjamin Fabra; and 11. Duplicate Original of the Approved Subdivision Plan. In reply, please be informed that pursuant to Sections 20 and 32 of R.A. No. 7279, pertinent portions of which read: "Sec. 20. Incentives for Private Sector Participating in Socialized Housing . To encourage greater participation in socialized housing, and further reduced the cost of housing units for the benefit of the underprivileged and homeless, the following incentives shall be extended to the private sector: xxx xxx xxx (d) Exemption from the payment of the following: (1) . . . (2) Capital gains tax on raw lands used for the project;" xxx xxx xxx "SECTION 32. Incentives. To encourage its wider implementation, participants in the CMP shall be granted with the following privileges or incentives: (a) . . . (b) Properties sold under the CMP shall be exempted from the capital gains tax; xxx xxx xxx" the land owner is exempt from the payment of capital gains tax and expanded withholding tax on the conveyance of the property, corresponding to the portion thereof that will be sold to a community association under CMP. Upon issuance of this letter of exemption, and upon registration of the documents of sale, a lien on the Certificate of Title of the land to be issued in the name of the Homeowners Association shall be caused to be annotated by the Register of Deeds having jurisdiction over the properties, to the effect that the said property shall be used for socialized housing pursuant to R.A. No. 7279. (BIR Ruling No. 501-93 dated December 22, 1993) TSEHcA However, it is observed that documentary stamp tax is not one of the taxes covered by the tax exemption clause in Sections 20 & 32 of RA No. 7279. Such being the case, the document conveying the property to you under the CMP shall be subject to documentary stamp tax imposed under Section 196 of the Tax Code, as amended, based on the consideration contracted to be paid for such realty or on its fair market value determined in accordance with Section 6 (E) of the said Code, whichever is higher. (BIR Ruling No. DA-567-98 dated December 18, 1998; BIR Ruling No. SH-(110)710-09 dated November 13, 2009) Please take note 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 title in the name of the Homeowners Association 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) after the submission of the requirements provided under RMO 15-2003. Notwithstanding the foregoing, the Bureau of Internal Revenue shall conduct verification and post-audit that the actual occupants of the properties transferred under the CMP are qualified beneficiaries and therefore, the sellers are 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 disclosed that the facts are different, and/or any of the requirements set forth in this letter are not complied with, then this ruling shall be considered null and void. cADEHI Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue