BIR Ruling No. 359-14

September 18, 2014 BIR RULING NO. 359-14 RA No. 7279; BIR Ruling No. 109-13 Glory Mijares Homeowners Association, Inc. Barangay Bagumbayan, Zone 5 Valladolid, Negros Occidental Attention: May Flor G. Villanueva President Gentlemen : This refers to the letter of Ma. Ana R. Oliveros, President of the Social Housing Finance Corporation (SHFC) dated May 5, 2014, endorsing the sale transaction between Glorioso H. Mijares and Glory Mijares 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 Glorioso H. Mijares (TIN 136-789-231-000) (hereinafter referred to as Landowner) is the registered owner of a parcel of land, identified as Lot No. 939 of the cadastral survey of Valladolid covered by Transfer Certificate of Title (TCT) No. T-270049 issued by the Registry of Deeds of Province of Negros Occidental. The aforesaid property is situated at Brgy. Bagumbayan, Valladolid with an area of Two Thousand Four Hundred Thirty Seven square meters (2,437 sq.m.), more or less. Glory Mijares Homeowners Association, Inc. (TIN 431-269-170-000), on the other hand, is a homeowner's organization duly registered with the Housing and Land Use Regulatory Board (HLURB) under Certificate of Registration No. 18812. On March 10, 2014, the parties executed a Deed of Absolute Sale whereby the Landowner transferred and conveyed Two Thousand Two Hundred Eighty Eight and 50/100 square meters (2,288.50 sq.m.) of the subject property to Glory Mijares Homeowners Association, Inc. at an agreed price of Nine Hundred Eighty One Thousand Seven Hundred Sixty Six Pesos and Fifty Centavos (P981,766.50). Pursuant to the certification issued by SHFC, Two Thousand Two Hundred Eighty Eight and 50/100 square meters (2,288.50 sq.m.) out of Two Thousand Four Hundred Thirty Seven square meters (2,437 sq.m.) covered by TCT No. T-270049 actually comprise a Community Mortgage Program (CMP) Project and shall be proportionately distributed to the association's qualified member-beneficiaries. 1 For this purpose, Glory Mijares 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 on April 8, 2014. HcSCED In support of its request, Glory Mijares Homeowners Association, Inc. has completely submitted on May 15, 2014 the following documents: 1) SHFC letter application for tax exemption; 2) Certification of the President of the SHFC that the subject property qualifies and is actually a CMP project; 3) Certified true copy of the Deed of Absolute Sale to the Community Association; 4) Certified true copy of the Articles of Incorporation of the Community Association; 5) Certified true copy of the Masterlist of Qualified Beneficiaries duly certified by the SHFC; 6) Certified true copies of the TCT and Latest Tax Declaration of the Property Sold to the Community Association; 7) Certified true copy of the Location Plan of the Lot Sold to the Community Association; 8) TIN ID/BIR Certificate of Registration of the seller and the Homeowner Association; and 9) 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" SEIDAC 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 by the landowner to Glory Mijares Homeowners Association, Inc. of Two Thousand Two Hundred Eighty Eight and 50/100 square meters (2,288.50 sq.m.) portion of the property covered by TCT No. T-270049 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 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. 109-13 dated March 21, 2013) 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 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. 109-13 dated March 21, 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 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. 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. HaTISE Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue ANNEX Glory Mijares Homeowners Association, Inc. Barangay Bagumbayan, Zone 5 Valladolid, Negros Occidental Name of Beneficiary Blk. Lot Total Area No. No. (Sq.M.) 1 Sison, Edwin V. 1 1 120.83 2 Emolaga, Rodel D. 1 2 106.19 3 Emolaga, Ronnel D. 1 3 85.44 4 Villanueva, May Flor G. 2 1 129.38 5 Villaruel, Roberto Jr. M. 2 2 103.75 6 Villaruel, Melby M. 2 3 103.75 7 Gonzaga, Mary Joy G. 2 4 85.44 8 Gonzaga, Ronnel G. 2 5 86.66 9 Legaspi, Annabelle V. 3 1 89.10 10 Doce, Marivic A. 3 2 89.10 11 Tiansay, Rhoda M. 3 3 47.60 12 Villaruel, Bonifacio A. 3 4 122.05 13 Villaruel, Jessie Sr. A. 3 5 103.75 14 Tibang, Annabelle P. 3 6 56.14 15 Villanueva, Jocelyn F. 3 7 52.48 16 Villanueva, Raffy F. 3 8 97.64 17 Villanueva, Rocky F. 3 9 68.35 18 Osmaa, Lenon John M. 3 10 68.35 19 Osmaa, Kathleen Marie M. 3 11 97.64 20 Osmaa, Chrissa Lee M. 3 12 115.95 21 Osmaa, Glenda Mae M. 3 13 117.17 22 Rosales Sr., Zacarias C. 4 1 68.35 23 Florentino, Lalaine O. 4 2 47.60 24 Pelinggon, Agustin Jr. A. 4 3 67.13 25 Gayondato, Bonife F. 4 4 73.23 26 Toldo, Danilo L. 4 5 85.44 Footnotes 1. See Annex for the masterlist of qualified beneficiaries.