BIR Ruling No. 367-11

October 5, 2011 BIR RULING NO. 367-11 RA 7279; BIR Ruling No. 398-93; BIR Ruling No. DA-468-98; BIR Ruling No. [SH-(041)317-09]; BIR Ruling No. [SH-(042)323-09] Samahang Magkakapitbahay ng Villa Beatriz Extension Homeowners Association, Inc. Purok I Area 5 Villa Beatriz Brgy. Old Balara, Quezon City Attention: Joel C. Aguilar President Gentlemen : This refers to your letter dated September 21, 2010 requesting for an exemption from the payment of capital gains tax and other taxes, if any relative to the transfer of title of land from Samahang Magkakapitbahay ng Villa Beatriz Ext. HOA, Inc. in favor of its qualified member-beneficiaries pursuant to Republic Act 7279 otherwise known as the "Urban Development and Housing Act of 1992". It is represented that Samahang Magkakapitbahay ng Villa Beatriz Ext. HOA, Inc. with Taxpayer's Identification No. 216-425-013-000, is the registered owner of the parcels of land located at Brgy. Matandang Balara, Quezon City and covered by Transfer Certificate of Title (TCT) No. N-305657, N-305658, N-305659, N-305660, N-305661, N-305662, N-305663, N-305664, N-305665, N-305666, N-305667, N-305668, N-305669 and N-305670 issued by the Registry of Deeds for Quezon City; that it is a non-stock, non-profit organization duly registered with the Housing and Land Use Regulatory Board (HLURB); that the aforesaid lot was acquired through a loan under the Community Mortgage Program (CMP) of the Social Housing Finance Corporation (SHFC); that said project was taken-out/paid on February 23, 2007 in the amount of Php840,000.00; and that the Samahang Magkakapitbahay ng Villa Beatriz Ext. HOA, Inc. , is now in the process of subdividing the purchased property to its member beneficiaries. In support of its request, Samahang Magkakapitbahay ng Villa Beatriz Ext. HOA, Inc. has completely submitted on October 18, 2010 the following documents: 1) Written Application for Exemption filed with the Law Division 2) Certified True Copy of the Transfer Certificate of Title (TCT) AaHcIT 3) Certification from the Social Housing Finance Corporation (SHFC) that the property was acquired through CMP 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 appropriate body (HLURB, NHA, LGU) see Annex 6) BIR Certificate of Registration of the Homeowner Association, and 7) Other pertinent documents In reply, please be informed that the transfer in favor of your individual member-beneficiaries of the said subdivided property is not subject to either the capital gains tax imposed under Section 27 (D) (5) of the Tax Code of 1997, as amended, or the creditable withholding tax imposed under Revenue Regulations No. 2-98, as amended, implementing Section 57 (B) of the same Code, considering that the said transfer of property is without any consideration since it is merely a formality to finally effect the transfer of the said property to its member-beneficiaries who actually bought the same from the former owner through your Association. In other words, the association is in fact transferring the ownership of the property to its member-beneficiaries who actually own the same. Furthermore, the said transfer is not subject to the donor's tax imposed under Section 99 of the Tax Code of 1997, since there is no donative intent or intention on your part to donate the said property to said member-beneficiaries, considering that you could not donate property the ownership of which belong to the donees (member-beneficiaries) themselves. (BIR Ruling DA-468-98 dated October 29, 1998) It is noted that under Section 196 of the Tax Code of 1997, the deeds or documents subject to the documentary stamp tax imposed therein are those where the realty sold shall be granted, assigned, transferred, or otherwise conveyed to a purchaser or purchasers or to any other person or persons designated by such purchaser or purchasers, thereby excluding from its purview the instant case considering that the supposed purchasers are actually the owners thereof. Besides, no consideration is involved in said transaction upon which the tax imposed could be based. Accordingly, the transfer of title of the said property in favor of your member-beneficiaries is not subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. However, the notarial acknowledgment to said deed of conveyance is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the Tax Code of 1997. (BIR Ruling No. 398-93 dated October 11, 1993) . SEHTIc It is, however, understood that the Certificate Authorizing Registration (CAR) shall only be issued after the submission of the requirements provided under RMO 15-2003 and 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 lots in this case does not exceed P400,000.00 for each qualified beneficiaries" (BIR Ruling No. [SH-(041)-317-09] dated May 15, 2009 and BIR Ruling No. [SH-(042)-323-09] dated May 20, 2009). 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, then this ruling shall be considered null and void. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue ATTACHMENT Samahang Magkakapitbahay ng Villa Beatriz Extension Homeowners Association, Inc. Purok I Area 5 Villa Beatriz Brgy. Old Balara, Quezon City Name of Beneficiary Blk. No. Lot No. Total Area (sq.m.) 1 Teresita S. Vilog 84-B-2 28.57 2 Maria Cristina S. Legaste 84-B-3 28.57 3 Joel C. Aguilar 84-B-4 28.57 4 Joselito J. Balon 84-B-5 28.57 5 Jeniffer R. Casaljay 84-B-6 28.57 6 Randy D. Salioa 84-B-7 28.57 7 Diosdado P. Villones 84-B-8 28.57 8 Rosalina D. Legaste 84-B-9 28.57 9 Sonny C. Legaste 84-B-10 28.57 10 Melchora B. Trogue 84-B-11 28.57 11 Jonathan R. Cuadra 84-B-12 28.57 12 Raul A. Discaya 84-B-13 28.57 13 Rodrigo L. Lizada 84-B-14 28.57 14 Relg G. Lizada 84-B-15 28.57