BIR Ruling No. 348-15

October 8, 2015 BIR RULING NO. 348-15 RA No. 7279; BIR Ruling No. 109-13; BIR Ruling No. 304-13 Purok Sibuyan Homeowners Association, Inc. Purok Sibuyan, Mother Brgy. Rosary Heights Cotabato City Attention: Jocelyn C. Sugabo President Gentlemen : This refers to the letter of Ma. Ana R. Oliveros, President of Social Housing Finance Corporation (SHFC) dated May 5, 2015, endorsing the sale transaction between Philippine National Bank (PNB) and Purok Sibuyan 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". HTcADC Documents submitted disclose that PNB (TIN: 000-188-209-000) (hereinafter referred to as Landowner) is the registered owner of a parcel of land, identified as Lot 5-B of the subdivision plan Psd-12-008382, being a portion of Lot 5 blk-4, (LRC) Psd-66273 covered by Transfer Certificate of Title (TCT) No. T-42697 issued by the Registry of Deeds for the Cotabato City. The aforesaid property is situated at Macapagal Subd., R. Heights MB, Cotabato City with an area of Five Thousand One Hundred Ten square meters (5,110 sq.m.), more or less. Purok Sibuyan Homeowners Association, Inc. (TIN: 006-366-175-000), on the other hand, is a homeowner's organization registered with the Housing and Land Use Regulatory Board (HLURB). On October 7, 2014, the parties executed a Deed of Absolute Sale whereby the Landowner transferred and conveyed Four Thousand Eight Hundred Sixty Five square meters (4,865 sq. m.) portion of the subject property to Purok Sibuyan Homeowners Association, Inc. at an agreed price of Four Million Eighty Eight Thousand Pesos (P4,088,000.00) under Community Mortgage Program (CMP) of the SHFC. Pursuant to the certification issued by SHFC, 4,865 out of 5,110 sq. m. covered by TCT No. T-42697 actually comprise a CMP Project and shall be proportionately distributed to the association's qualified member-beneficiaries. 1 For this purpose, Purok Sibuyan 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. In support of its request, Purok Sibuyan Homeowners Association, Inc. has completely submitted on May 8, 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; aScITE 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 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 Purok Sibuyan Homeowners Association, Inc. of the 4,865 out of 5,110 sq. m. covered by TCT No. T-42697 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 Certificates 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) HEITAD However, the documentary stamp tax is not one of the taxes covered by the tax exemption clause in Sec. 20 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. (BIR Ruling No. 109-13 dated March 21, 2013) 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 4,865 out of 5,110 sq. m. covered by TCT No. T-42697 by the landowner to Purok Sibuyan 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 Purok Sibuyan Homeowners Association, Inc. Purok Sibuyan, Mother Brgy. Rosary Heights Cotabato City Blk. Lot Total Name of Beneficiary No. No. Area (sq.m.) 1 Macion, Alexander Paulin 1 1 56.88 2 Esquierdo, Rolly Aquino 1 2 56.88 3 Martirez, Jovy Pelio 1 3 56.88 4 Guevarra, Juliet Montesor 1 4 56.88 5 Sedik, Cecilia Oca 1 5 56.88 6 Mapait, Rogelio Sr. Morales 1 6 56.88 7 Ting, Josephine Salvatierra 2 1 56.88 8 Dieta, Johnny Papa 2 2 56.88 9 Ting, Arnold Barjel 2 3 56.88 10 Gabe, Vivian Flores 2 4 56.88 11 Salvatierra, James Paul Palmes 2 5 56.88 12 Legaspi, Alvin Bagongon 2 6 56.88 13 Pescadero, Jimmy Yanez 2 7 56.88 14 Coral, Elena Belaca-ol 2 8 56.88 15 Coral, Jocelyn Belacaol 2 10 56.88 16 Yray, Edgardo Hemino 2 11 56.88 17 Savarez, Toribio Galon 2 12 56.88 18 Cabasag, Zenaida Mobadan 2 13 56.88 19 Savarez, Marrie Ann Galon 2 14 56.88 20 Kaurak, Usman Lagunday 2 15 56.88 21 Papas, Johnny Galon 2 16 56.88 22 Arsad, Rommel Guiaplos 2 17 56.88 23 Arsad, Samrah Guiaplos 2 18 56.88 24 Necesito, Bernadith Padios 2 19 56.88 25 Necesito, Henry Jr. Padios 2 20 56.88 26 Sequina, Liezl Cresino 2 21 56.88 27 Ching, Winstone Ty 2 22 56.88 28 Dela Cruz, Rosalyn Lago 2 24 56.88 29 Benting, Ignacio Jr. Cadevida 2 25 56.88 30 Catugal, Marie Cho Benting 2 26 56.88 31 Soverano, Marvin Thomas Thomas 2 27 56.88 32 Mobadan, Alberto Galido 2 28 56.88 33 Olivo, Martin Resohento 2 29 56.88 34 Pascual, Ronald Ruslin 2 30 56.88 35 Idris, Al-Raschid Bagis 2 31 56.88 36 Alao, Jocelyn Bolante 2 32 56.88 37 Espiritu, Rema Asne 2 33 56.88 38 Tan, Resty Laureano 2 34 56.88 39 Escalona, Maricar Salmorin 3 1 56.88 40 Ruaya, Lydia Mantua 3 2 56.88 41 Garganian, Dyan Suarez 3 3 56.88 42 Geno, Flordeliza Wayas 3 4 56.88 43 Espino, Joel Angelo Quintana 3 5 56.88 44 Austria, Leroy Paul Minao 3 6 56.88 45 Sugabo, Jocelyn Catiloc 3 7 56.88 46 Mananquil, Armila May Matta 3 8 56.88 47 Catiloc, Ronie Olpoc 3 9 56.88 48 Matta, Alejandro Sr. Gonzaga 3 10 56.88 49 Lastierre, Monaliza Belaca-ol 3 11 56.88 50 Perewperew, Felix Sumagang 3 12 56.88 51 Bato, Adelaida Saratao 3 13 56.88 52 Empeynado, Ramona Lastierre 3 14 56.88 53 Hernane, Juanito Rodelas 3 15 56.88 54 Cuning, Sharon Rivera 3 16 56.88 55 Salik, Lily Usop 3 17 56.88 56 Bayani, Jonathan Bernales 3 18 56.88 57 Alamada, Airesha Garil 3 19 56.88 58 Ramos, Melchor Orcia 3 20 56.88 59 Arsad, Romano Guiaplos 3 21 56.88 60 Catugal, Sansin Gom-os 3 22 56.88 61 Gamas, Josemar Molleda 3 23 56.88 62 Cabrera, Mark Anthony Chua 3 24 56.88 63 Carter, Jun Mar Anoba 3 25 56.88 64 Timon, Wilson Bolante 3 26 56.88 65 Jebone, Gregorio Tamo 3 27 56.88 66 Anok, Gringo Ulanin 3 28 56.88 67 Jaleco, Domingo Jr. Villar 3 29 56.88 68 Anok, King Ulanen 3 30 56.88 69 Claver, Bibiano Purisima 3 31 56.88 70 Anok, Suweb Kura 3 32 56.88 71 Loreto, William Morales 3 33 56.88 72 Bundola, Bonna Tali 3 34 56.88 73 Bingel, Ma. Antonia Sara 4 1 58.14 74 Estacio, Jesusa Mapait 4 2 58.14 75 Mapait, Rogelio Jr. Recana 4 3 58.14 76 Abdulrasid, Ashrap Limba 4 4 58.14 77 Tan, Ma. Grace Laureano 4 5 58.14 78 Unsi, Jihan Abdulrasid 4 6 58.14 79 Almiroda, Exiquiel Caparida 4 7 59.40 80 Bacera, Jose Jr. Pascual 4 8 59.40 81 Navarro, Rodel Mapait 4 9 59.40 82 Mariano, Resty Usop 4 10 59.40 83 Gumama, Manzur Wahab 4 11 59.40 84 Villamor, Janneth Martin 4 12 59.40 Footnotes 1. See Annex for the masterlist of qualified beneficiaries.