BIR Ruling No. 352-12

May 21, 2012 BIR RULING NO. 352-12 RA No. 7279; BIR Ruling No. 130-10; BIR Ruling No. 040-10 Woodpecker Homeowners Association, Inc. Blk. 3 Lot 21 Golden Acres Subd. Talon 5, Las Pias City Attention: Virginia B. Ilagan President Gentlemen : This refers to your letter dated December 1, 2011 requesting for a tax exemption on the sale of real property by Rosario N. Villafranca, et al. in favor of Woodpecker Homeowners Association, Inc. pursuant to Republic Act 7279 otherwise known as the "Urban Development and Housing Act of 1992". It appears that Rosario N. Villafranca with Tax Identification Number 225-325-995-000, Carmelita N. Villafranca with Tax Identification Number 000-410-791-808, Pepito N. Villafranca with Tax Identification Number 410-791-725, Angelita V. Go Ching with Tax Identification Number 410-791-564, Victor N. Villafranca with Tax Identification Number 102-100-160, Teresita N. Villafranca with Tax Identification Number 410-791-235-000, Noel N. Villafranca with Tax Identification Number 233-898-760-000, Mylene N. Villafranca with Tax Identification Number 194-940-570-000 and Rodolfo Neduasa with Tax Identification Number 105-391-736-000, are the registered owners of a parcel of land, identified as Lot 21, Block 3 of the Subdivision Plan PSD-66213, Sheet 1, being a portion of the land described on Plan PSU-174433, L.R.C. Record No. covered by Transfer Certificate of Title (TCT) No. 005-2011003261 issued by the Registry of Deeds for Las Pias City. The aforesaid property is situated at Brgy. Pamplona, Las Pias City with an area of four hundred ninety square meters (490 sq.m.), more or less. Woodpecker Homeowners Association, Inc. with Tax Identification Number 297-214-207-000, on the other hand, is a homeowner's organization registered with the Housing and Land Use Regulatory Board (HLURB). On November 14, 2011, the parties executed a Deed of Absolute Sale whereby the owners thru their Attorneys-in-Fact, Roderick E. Neduasa and Carmelita N. Villafranca, transfer and convey the subject property to Woodpecker Homeowners Association, Inc. at an agreed price of One Million Five Hundred Sixty Eight Thousand Pesos (P1,568,000.00). Pursuant to a certification issued by Social Housing Finance Corporation, four hundred ninety square meters (490 sq.m.) of the property covered by TCT No. 005-2011003261 is actually a CMP Project and shall be proportionately distributed to the association's qualified member-beneficiaries. 1 For this purpose, Woodpecker Homeowners Association, Inc. secured a housing loan under the Community Mortgage Program (CMP), a financing assistance program of the Social Housing Finance Corporation (SHFC) a subsidiary of the National Home Mortgage Finance Corporation (NHMFC). ISDCaT 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. Such being the case, the sale of the aforestated property by the owners thru their Attorneys-in-Fact, Roderick E. Neduasa and Carmelita N. Villafranca to Woodpecker Homeowners Association, Inc., 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 R.A. 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 Sec. 20 of RA 7279. Accordingly, the owners thru their Attorneys-in-Fact, Roderick E. Neduasa and Carmelita N. Villafranca are liable to pay the documentary stamp tax on the documents conveying the afore-stated property 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. 130-10 dated December 1, 2010) CHIaTc 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 RMO15-2003. (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 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 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 ATTACHMENT Woodpecker Homeowners Association, Inc. Blk. 3 Lot 21 Golden Acres Subd. Talon 5, Las Pias City Blk. No. Lot Total Area Name of Beneficiary No. (sq.m.) 1 Jacinto de Villa Remorquez 21-A 22.27 2 Christy E. Taniega 21-B 22.27 3 Regeiner Y. Fulgencio 21-C 22.27 4 Carmela Tinoyog 21-D 22.27 5 Mynalyn Tantoy 21-E 22.27 6 Raul B. Aquino 21-F 22.27 7 Larry B. Aquino 21-G 22.27 8 Evelyn A. Macalino 21-H 22.27 9 Susan Monteverde 21-I 22.27 10 Joylene Monteverde 21-J 22.27 11 Neptali J. del Mundo 21-K 22.27 12 Leonardo Bongalon 21-L 22.27 13 Sara O. Isa 21-M 22.27 14 Virginia B. Ilagan 21-N 22.27 15 Julius Vergel Ilagan 21-O 22.27 16 Edmond Ilagan 21-P 22.27 17 Oscar Bueno 21-Q 22.28 18 Juniel E. Menil 21-R 22.28 19 Arcelie Asog 21-S 22.28 20 Arjun U. Tasil 21-T 22.28 21 Hasan S. Isa 21-U 22.28 22 Dolores Najera 21-V 22.28 Footnotes 1. see Annex for the masterlist of qualified beneficiaries.