BIR Ruling No. 373-12

June 4, 2012 BIR RULING NO. 373-12 RA 7279; BIR Ruling No. 066-2011 General Services Department Interim Fixed Assets Management and Control Division Local Government of Quezon City Elliptical Road, Diliman, Quezon City Attention: Rolando P. Montiel City Government Department Head III Official Property Custodian Gentlemen : This refers to your letter dated January 4, 2012 duly indorsed by the Legal Division of Revenue Region No. 7 Quezon City requesting for a ruling that the sale by Ofelia G. Arce of her properties to the Quezon City Government intended for the latter's socialized housing program is exempted from payment of capital gains tax and other fees allowed under R.A. No. 7279, otherwise known as the Urban Development and Housing Act of 1992. Documents submitted show that Ofelia G. Arce with Taxpayer's Identification No. 135-901-883-000 is the registered owner of parcels of land covered by Transfer Certificate of Title (TCT) No. RT-45344 (75105),designated as Lot No. 614 of Tala Estate, GLRO Rec. No. 6563 and Transfer Certificate of Title (TCT) No. N-294617, designated as Lot D of Subd. Plan (LRA) psd-384988 approved as a non-subd. project, being a portion of the cones of Lot 381, 475 & 722, Tala Estate LRC Rec. No. 6563 issued by the Registry of Deeds for the Quezon City. The aforestated lots are located at Brgy. Kaligayahan containing areas of 44,554 sq.m. and 4,322 sq.m. more or less, respectively. The Quezon City Government with Taxpayer's Identification No. 001-968-647-000, on the other hand, is a public entity created and existing under the laws of the Philippines and is desirous of purchasing the said properties for socialized housing purposes. The City Council adopted Resolution No. SP-5020 S-2010, authorizing the City Mayor to negotiate for acquisition of the subject properties for the City's resettlement and housing program. On December 15, 2011, a Deed of Conveyance was executed by and between the afore-named parties transferring the subject realties in consideration for fifteen million pesos (P15,000,000.00). On October 27, 2011, a Memorandum of Agreement (For the Development of Bistekville II) was executed by Phinma Property Holdings Corporation, Atty. Ofelia Arce and the Quezon City Government. The project shall consist of a mass socialized housing project to be called the BISTEK VILLAGE II under BP 220 design standards. The project shall consist of a total of 48,876 square meters which shall be divided into one thousand four (1,004) lots, more or less. It shall comprised of land development and construction of loft-type row houses, broken down into nine hundred twenty one (921) 1 housing units with a floor area of 27 square meters, more or less, each of which shall be offered as socialized housing units. IHCDAS Under the MOA, the landowner shall contribute the land area to the project and shall transfer the land area to the LGU for the development into a socialized housing project, The Local Government of Quezon City shall be the proponent and loan originator and partner under the Quezon City Urban Upgrading and Renewal Program and Phinma Property Holdings Corporation shall undertake the land development of the Project. In reply, please be informed that pursuant to Section 20 of Republic Act (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: xxx xxx xxx (d) Exemption from the payment of the following: xxx xxx xxx 2) Capital gains tax on raw lands use for the project; xxx xxx xxx" the owner of the raw land is exempt from the payment of capital gains tax or the withholding tax under Revenue Regulations No. 12-98, as amended, on the conveyance on the portion of land pertaining to the nine hundred twenty one (921) lots which will be actually used for socialized housing project. Upon application for exemption, a lien on the titles of the land shall be annotated by the Register of Deeds having jurisdiction over the properties, to the effect that the same are to be applied or are being applied to socialized housing project pursuant to RA 7279. However, the sale is subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997 based on the actual consideration of the properties transferred, considering that one of the contracting parties is the Government. ( BIR Ruling No. 066-2011 dated March 9, 2011 ) Please take note 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 lands 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) after the submission of the requirement provided under RMO 15-2003, including proof of payment of documentary stamp tax. cICHTD 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 Footnotes 1. 83 lots shall remain under the name of the landowner.