BIR Ruling No. 351-12

May 21, 2012 BIR RULING NO. 351-12 RA 7279; RR 11-97;BIR Ruling No. 413-11 Goldenville Realty and Development Corporation 3368 Harvard Street, Pinagkaisahan Makati City Attention: Ida Abendano-Guintu President and General Manager Gentlemen : This refers to your letter dated July 26, 2011 requesting tax exemption on the transfer of titles of the purchased properties in Brgy. Pinugay, Baras, Rizal in the name of GRDC pursuant to Republic Act (R.A.) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". Documents submitted show that Goldenville Realty and Development Corporation with Tax Identification Number 002-562-057-000, is the absolute and registered owner of parcels of land located at Brgy. Pinugay, Baras, Rizal, covered by Transfer Certificates of Titles, to wit: TCT No. Area (sq. m.) Tax Declaration No. 069-2011001159 2,989 03-0004-08290 069-2011001160 21,591 03-0004-08291 069-2011001161 21,828 03-0004-08292 069-2011001162 16,230 03-0004-08293 that pursuant to the Deed of Conveyance executed on July 6, 2011, thirty four thousand eight hundred eighty four square meters (34,884 sq.m.) portion of the properties covered by TCT No/s. 069-2011001159 to 069-2011001162 was sold to NHA for one hundred million pesos (P100,000,000.00).The properties were developed by Goldenville Realty and Development Corporation into a socialized housing site in Brgy. Pinugay, Baras, Rizal. On July 6, 2011, a Memorandum of Agreement (for developed lots & completed housing units) was executed by and among Goldenville Realty and Development Corporation as the landowner/developer, AFP Housing Homeowners Association, Inc. and PNP Housing Homeowners Association, Inc., as the beneficiaries, and the NHA, with TIN 000-916-384-000, as the implementing government agency for the AFP/PNP Housing Program as cited under Administrative Order No. 9 dated April 11, 2011. Under the MOA, members of the AFP Housing Homeowners Association, Inc. and PNP Housing Homeowners Association, Inc.,shall be provided by the NHA with a financial grant for the acquisition house and lot packages in the AFP/PNP Housing Project through the Community Initiative Approach Program in the amount of Php175,000.00 for a House and Lot Package of thirty six square meters (36.00 sq.m.) lot and twenty two square meters (22.00 sq.m.) floor area and Php208,000.00 for a House and Lot Package of forty square meters (40.00 sq.m.) lot and eighteen square meters (18.00 sq.m.) floor area. EHCcIT In support of your above request, you submitted the following documents: 1) Certified true copy of the SEC Registration of the Corporation; 2) Certified true copy of the Articles of Incorporation; 3) BIR Certificate of Registration; 4) Copy of HLURB Certificate of Registration of AFP Housing Homeowners Association incorporation and the PNP Housing Homeowners Association incorporation; 5) Notarized copy of Deed of Conveyance dated July 6, 2011 between Goldenville Realty and Development Corporation and the National Housing Authority; 6) Copy of the Memorandum of Agreement by and among Goldenville Realty and Development Corporation, AFP Housing Homeowners Association incorporation and the PNP Housing Homeowners Association incorporation and National Housing Authority; 7) Certified True Copies of the Transfer Certificate of Titles and Tax Declarations; 8) Affidavit of Non-Forum Shopping; 9) Other pertinent documents. In reply, please be informed that pursuant to Sections 19 and 20 RA No. 7279, pertinent portions of which state that: "Sec. 19. Incentives for the National Housing Authority. The National Housing Authority, being the primary government agency in charge of providing housing for the underprivileged and homeless, shall be exempted from the payment of all fees and charges of any kind, whether local or national, such as income and realty taxes. All documents or contracts executed by and in favor of the National Housing Authority shall also be exempt from the payment of documentary stamp tax and registration fees, including fees required for the issuance of transfer certificates of title. "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: (1) Project-related income taxes; (2) ...; (3) Value-added tax for the project contractor concerned; xxx xxx xxx" the landowners/developers of properties who sell their properties for use in a socialized housing project are exempt from the payment of the project-related income taxes. Such being the case, the sale of the aforestated properties by Goldenville Realty and Development Corporation to NHA in so far as the thirty four thousand eight hundred eighty four square meters (34,884 sq.m.) portion of the properties covered by TCT No/s. 069-2011001159 to 069-2011001162 is concerned is exempt from the project-related income taxes and consequently from withholding tax. Upon issuance of this letter of exemption, and upon registration of the documents of sale, a lien on the Certificates of Title of the land to be issued in the name of the NHA shall be caused to 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 R.A. No. 7279. (BIR Ruling No. 413-2011 dated October 28, 2011) CHcETA Moreover, pertinent portions of RMC No. 42-01 dated October 5, 2001, provide, viz. : xxx xxx xxx A. National Housing Authority (NHA). The NHA, being the primary government agency in charge of providing housing for the underprivileged and homeless citizens shall be exempted from the payment of the following national internal revenue taxes: (1) ... (2) Documentary stamp tax on sales transactions executed by and in favor of the NHA in connection with socialized housing projects. Since Section 19 of R.A. 7279 exempts "all documents or contracts executed by and in favor of the NHA," the exemption from documentary stamp tax extends to the other party (either seller or buyer) that is dealing or transacting with the NHA. xxx xxx xxx The exemption from documentary stamp tax of NHA in connection with any of its socialized housing project extends to the other party (either seller or buyer) that deals or transacts with the NHA. Consequently, since NHA is a party to the sale, no documentary stamp tax shall be due on such sale, either on NHA or the party with which NHA is transacting. Accordingly, the transfer by NHA of its real properties in favor of member-beneficiaries is, likewise, exempt from the payment of documentary stamp tax under Section 196 of the Tax Code of 1997, as amended. (BIR Ruling No. 413-2011 dated October 28, 2011) Pursuant to Section 20 of RA 7279, a project contractor of a socialized housing project shall also be exempt from the payment of value-added tax (VAT) on the project concerned. Relative thereto, Section 4.109-1 (B) (1) (p) (3) of RR No. 16-2005 states that: "Section 4.109-1. VAT-Exempt Transactions. (A) In general. "VAT-exempt transactions" refer to the sale of goods or properties and/or services and the use or lease of properties that is not subject to VAT (output tax) and the seller is not allowed any tax credit of VAT (input tax) on purchases. xxx xxx xxx (B) Exempt transactions. (1) Subject to the provisions of Subsection (2) hereof, the following transactions shall be exempt from VAT: xxx xxx xxx (p) The following sales of real properties are exempt from VAT, namely: xxx xxx xxx (3) Sale of real properties utilized for socialized housing as defined under RA No. 7279, and other related laws, such as RA No. 7835 and RA No. 8763, wherein the price ceiling per unit is P225,000.00 or as may from time to time be determined by the HUDCC and the NEDA and other related laws. . . . ." Furthermore, pursuant to HUDCC Resolution No. 1, Series of 2008, dated December 11, 2008, and as circularized by Revenue Memorandum Circular No. 30-2009, pertinent portion of which reads: "THEREFORE BE IT RESOLVED, AS IT IS HEREBY RESOLVED that the adjustment of the Low Cost Level 1-A socialized housing loan ceiling from P300,000.00 to P400,000.00 be APPROVED, as the same is hereby APPROVED." the newly adjusted price ceiling of P400,000.00 for socialized housing shall apply to sale of real properties utilized for socialized housing, as defined under R.A. No. 7279 otherwise known as "Urban Development and Housing Act", and other related laws such as R.A. No. 7835 otherwise known as the "Comprehensive and Integrated Shelter Financing Act of 1994" and R.A. No. 8763 otherwise known as the "Home Guaranty Act of 2000", beginning January 1, 2009. EScAHT Moreover, Section 2 of Revenue Regulations No. 17-2001 provides: Section 2. Definition of Terms. As used in these Regulations, the following terms shall have the following meaning: xxx xxx xxx "A socialized housing unit shall not exceed P150,000.00 (now P400,000.00) for a house and lot package, subject to periodic adjustment or increase as the Housing and Land Use Regulatory Board (HLURB) may effect from time to time. In the case of sale of homelots only, the price shall not exceed forty percent (40%) of the maximum limit prescribed for the house and lot package ." (Emphasis supplied) Thus, Goldenville Realty and Development Corporation, being the contractor of a socialized housing project known as the AFP/PNP Housing Project Site in Brgy. Pinugay, Baras, Rizal, is likewise exempt from the payment of VAT on the sale of lot valued at one hundred sixty thousand pesos (P160,000.00) and below, house and lot valued at four hundred thousand pesos (P400,000.00) and below, on its gross receipts from the land development of the socialized housing site and from the sale of developed lots to NHA. However, its purchases of goods/articles shall be subject to VAT, even if the said purchases are to be used for the socialized housing project, since VAT is an indirect tax which can be passed on by the seller of the goods/services. Moreover, it shall be understood that Goldenville Realty and Development Corporation must issue non-VAT official receipts on its gross receipts from the said socialized housing project. Finally, it is understood that the Certificate Authorizing Registration (CAR) shall only be issued after it is established upon proper verification by the Revenue District Officer (RDO) concerned that, considering the rules on valuation of real property, the actual selling price per sale transaction of the units in this case does not really exceed P400,000.00 for house and lot packages and P160,000.00 for lot only for socialized housing project. Thus, sale of a unit above the maximum amount shall be subject to the corresponding internal revenue taxes. 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