Tax Exemption from the Payment of the Capital Gains Tax on Properties Sold under the National Shelter Program

December 28, 1992 BIR RULING NO. 374-92 21 (e) 208-92 374-92 Hon. Teodorio T. Encarnacion Undersecretary Department of Public Works and Highways Bonifacio Drive, Port Area, Manila S i r : This refers to your letter dated September 8, 1992 relative to the letter dated August 24, 1992 of the Secretary General of the Housing and Urban Development Coordinating Council (HUDCC), requesting in behalf of the landowners whose lands shall be acquired and used as relocation site of squatters effected by your projects in the National Capital Region, exemption from the payment of the capital gains tax on properties sold under the National Shelter Program. LLphil It is represented that your Department, in its effort to effect relocation program had long been negotiating with landowners in several places for low priced parcels of land; that the present landowners, convinced and considerate with the plight of would be recipient squatters, voluntary gave in to the offered valuation of P200.00/square meter on the condition that your trustee, HUDCC, would intercede for their exemption from the payment of the said capital gains tax. In reply, please be informed that pursuant to Section 20 of R.A. No. 7279, pertinent portions of which reads: "Sec. 20. Incentives for Private Sector Participating in Socialized Housing. To encourage greater private sector participating 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: (1) Project-related income taxes; (2) Capital gains tax on raw lands used for the project; xxx xxx xxx the landowners whose lands would be acquired and used as relocation site of squatters affected by the DPWH projects in the National Capital Region shall be exempt from the payment of capital gains tax on the sale of their property in favor of the Republic of the Philippines, provided, however , that the following requirements are complied with: a. Certification from the Housing and Urban Development Coordinating Council (HUDCC) that the said property is covered by the said relocation project; b. Recommendation from the Revenue District Officer where the property is located, that the landowner of the said property is a bonafide claimant for tax exemption pursuant to the aforequoted provision. However, it is observed that documentary stamp tax is not one of the taxes covered by the tax exemption clause in Sec. 20 of R.A. 7279. Such being the case, the landowners shall be liable to pay the documentary stamp tax on the document conveying the property to the Republic of the Philippines imposed under Sec. 196 of the Tax Code, as amended, based on the actual consideration paid by the government to the landowners. Very truly yours, JOSE U. ONG Commissioner of Internal Revenue