BIR Ruling No. 346-13

September 11, 2013 BIR RULING NO. 346-13 RA No. 7279; BIR Ruling No. 130-10; BIR Ruling No. 040-10 Trinidad V. Cuadra and Concepcion C. Palaran 133 Marcel Banlat Road Brgy. Tandang Sora, Quezon City Madam : This refers to the letter of Ma. Ana R. Oliveros, President of Social Housing Finance Corporation dated January 17, 2013, indorsing the sale of a property to La Mesa Ville 2 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 Trinidad V. Cuadra (TIN: 203-505-375-000) and Concepcion C. Palaran (TIN: 416-953-911-000) are the registered owners of a parcel of land, identified as Lot 1298-A-1-H of the subd. Plan Psd-13-003922, being a portion of Lot 1298-A-1, Psd-21980, LRC Rec. No. 5941 covered by Transfer Certificate of Title (TCT) No. V-105864 issued by the Registry of Deeds for the Valenzuela City. The aforesaid property is situated at Brgy. Ugong, Valenzuela City with an area of One Thousand Four Hundred Twenty and 50/100 square meters (1,420.50 sq.m.), more or less. La Mesa Ville 2 Homeowners' Association, Inc. (TIN: 405-589-893-000), on the other hand, is a homeowner's organization registered with the Housing and Land Use Regulatory Board (HLURB). On December 3, 2012, Social Housing Finance Corporation (SHFC) issued a letter-guaranty with Log No. 0837 in favor of the owners of the subject property an undertaking to pay the amount of Two Million Five Hundred Sixty Thousand Pesos (P2,560,000.00), thus with the issuance of letter-guaranty, on December 4, 2012, the parties executed a Deed of Absolute Sale whereby the owners transferred and conveyed the subject property to La Mesa Ville 2 Homeowners' Association, Inc. at an agreed price of Three Million Eight Hundred Thirty Five Thousand Three Hundred Fifty Pesos (P3,835,350.00). Pursuant to the certification issued by SHFC, the property covered by TCT No. V-105864 is actually a CMP Project and shall be proportionately distributed to the association's thirty two (32) qualified member-beneficiaries. 1 For this purpose, La Mesa Ville 2 Homeowners' Association, Inc. secured a housing loan under the Community Mortgage Program (CMP), a financing assistance program of the SHFC a subsidiary of the National Home Mortgage Finance Corporation (NHMFC). IcSHTA In reply, please be informed that pursuant to Sections 20 and 32 of RA No. 7279, pertinent portions of which state that: "Sec. 20. Incentives for Private Sector Participating in Socialized Housing . To encourage greater private sector participation in socialized housing and further reduce the cost of housing units for the benefit of the underprivileged and homeless, the following incentives shall be extended to the private sector: (d) Exemption from the payment of the following: (2) Capital gains tax on raw lands used for the project; xxx xxx xxx. 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 for use in a socialized housing project are exempt from the payment of capital gains tax. ECaTDc Such being the case, the sale of the aforestated property by the owners to La Mesa Ville 2 Homeowners' Association, Inc. covered by TCT No. V-105864 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 caused to 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. 130-10 dated December 1, 2010) However, the documentary stamp tax is not one of the taxes covered by the tax exemption clause in Section 32 of R.A. 7279. Accordingly, the owner is liable to pay the documentary stamp tax on the document conveying the aforestated property based on the consideration contracted to be paid for such realty. (Revenue Regulations No. 11-97) 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 title 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. 040-10 dated August 27, 2010) 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. DTISaH 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 La Mesa Ville 2 Homeowners' Association, Inc. La Mesa St., Brgy. Ugong, Valenzuela Blk. Lot Total Area Name of Beneficiary No. No. (sq.m.) 01 DANILO R. RABINO 1 1 47.89 02 EDDIE P. FERNANDEZ 1 2 47.89 03 BENJAMIN M. VERSOLA JR. 1 3 47.89 04 AILEEN V. PADUA 1 4 48.57 05 SHIRLEY R. GUSTILO 2 1 41.04 06 TOM BRYAN H. MAGNAYE 2 3 41.04 07 KEITH ARVIN H. MAGNAYE 2 5 41.04 08 JONALD G. SANCHEZ 2 7 41.04 09 RECO M. IGCASAMA 2 2 41.04 10 ROSARIO C. OCBA 2 4 41.04 11 NOEL BAUTISTA 2 6 41.04 12 MARY GRACE V. PANSAON 2 8 41.04 13 JOSEPH P. AROPO 3 1 41.04 14 JASMIN A. OWOGOWOG 3 3 41.04 15 VIVIAN A. OWOGOWOG 3 5 41.04 16 WILFREDO C. ACOSTA 3 7 41.04 17 ROWENA B. CHUA 3 2 41.04 18 MARITES P. REQUEZ 3 4 41.04 19 MA. ANNALYN H. MAGNAYE 3 6 41.04 20 REYGIE M. GORGONIO 3 8 41.04 21 MICHAEL B. CARLOS 4 1 46.52 22 GUMERCINDO B. MANGENTE 4 3 46.52 23 SAMGELICA M. YACUB 4 5 46.52 24 IMELDA G. CATACUTAN 4 7 46.23 25 LANIE T. DEMA-ALA 4 2 46.52 26 MA. DELIA L. TYQUICO 4 4 41.04 27 JULIE A. MABASA 4 6 41.04 28 NOVALYN C. DONADO 4 8 41.04 29 RUEL C. NADERA 5 1 51.58 30 ADORA D. ALGODON 5 2 51.99 31 ORLANDO M. ALMARINES JR. 5 3 52.85 32 EMMANUEL M. QUILATES 5 4 59.71 Footnotes 1. See Annex for the masterlist of qualified beneficiaries.