Taxability of the Sale of Real Property in accordance with the NHA Community Mortgage Program

December 3, 1992 BIR RULING NO. 347-92 21 (e), 24 276-92 347-92 Matangtubig Homeowners Association, Inc. 4 C. Benitez St., Horseshoe Cubao, Quezon City Attention: Mr . Cecilio R . Renegado President Gentlemen : This refers to your letter dated August 31, 1992, in effect, requesting for a ruling that the sale of Equitable Banking Corporation and the Government Service Insurance System of their real property located at 4 C. Benitez St., Horseshoe, Cubao, Quezon City to the Matangtubig Homeowners Association, Inc., a non-stock, non-profit community organization duly registered with Securities and Exchange Commission (SEC) in accordance with the Community Mortgage Program (CMP) initiated by the National Housing Authority is exempt from capital gains tax pursuant to Section 32(a) and (b) of R.A. 7279 which was approved on March 24, 1992 and published in the March 28, 1992 issue of the Philippine Times Journal and Malaya, newspaper of general circulation. cdta It appears that the Community Mortgage Program (CMP) is a mortgage financing program of the National Home Mortgage Finance Corporation (NHMFC) which assists legally organized associations of underprivileged and homeless citizens to purchase and develop a tract of land under the concept of community ownership; that through a Letter Guaranty by said Government Financing Institution the landowner executes a Deed of Sale to the Association which stands as the borrower and debtor to the extent of the total amount paid of NHMFC to the landowner; that in the instant case, the property being sold to the Matangtubig Homeowners Association, Inc. is owned by the Equitable banking Corporation and the Government Service Insurance System covered by TCT Nos. 120762, 212664, 212665, 212666 and 212667 of the Registry of Deeds of Quezon City; that the said transaction was certified by the National Home Mortgage Finance Corporation as an approved project under the Community Mortgage Program (CMP) of the government. In reply, please be informed that pursuant to Section 32 of R.A. No. 7279, pertinent portion of which reads: "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 CMP shall be exempted from the capital gains tax; and xxx xxx xxx the landowners who sell their property to their Tenant's Association pursuant to the Community Mortgage Program are exempt from the payment of capital gains tax and from the expanded withholding tax under Revenue Regulations No. 1-90. Upon the sale thereof, the capital gains realized by the owners shall be exempt from capital gains tax pursuant to the aforequoted provision of R.A. 7279, otherwise known as the Urban Development and Housing Act of 1992. Such being the case, the sale by the Equitable Banking Corporation and the Government Service Insurance System of their real property to the Matangtubig Homeowners Association, Inc. is exempt from the capital gains tax and the expanded withholding tax. However, it is observed that documentary stamp tax is not one of the taxes covered by the tax exemption clause in Sec. 20 of R.A. 7279. Such being the case, the document conveying the property to you under the CMP shall be subject to the documentary stamp tax imposed under Sec. 196 of the Tax Code, as amended, based on the actual consideration paid by your association to the landowner. 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 the transaction is not covered by the Community Mortgage Program (CMP) contemplated under R.A. 7279, then this ruling shall be considered null and void. Very truly yours, VICTOR A. DEOFERIO, JR. Deputy Commissioner & Officer-In-Charge