BIR Ruling No. 376-14

October 8, 2014 BIR RULING NO. 376-14 RA No. 7279; BIR Ruling No. 109-13; BIR Ruling No. 304-13 Samahang Pinagbuklod-Esna Homeowners' Association, Inc. Purok 6, Brgy. San Vicente, Bian, Laguna Attention: Ma. Liwayway A. Lopena President Gentlemen : This refers to the letter of Ma. Ana R. Oliveros, President of Social Housing Finance Corporation (SHFC) dated May 14, 2014, endorsing the sale transaction between Esna Financing and Investment Corporation and Samahang Pinagbuklod-Esna 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 Esna Financing and Investment Corporation 1 (TIN 000-713-295-000) (hereinafter referred to as Landowner) is the registered owner of a parcel of land, identified as Lot 337-B of the subd. plan (LRC) Psd-225312, being a portion of Lot 337, Binan Estate (Swo-24019), LRC Rec. No. 8374 covered by Transfer Certificate of Title (TCT) No. T-206906 issued by the Registry of Deeds for the Calamba Branch. The aforesaid property is situated at Brgy. San Vicente, Bian, Laguna with an area of One Thousand Four Hundred Twenty Five square meters and fifty square decimeters (1,425.50), more or less. Samahang Pinagbuklod-Esna Homeowners' Association, Inc. (TIN 414-067-240-000), on the other hand, is a homeowner's organization registered with the Housing and Land Use Regulatory Board (HLURB) under Certificate of Registration No. 14873. On March 5, 2014, the parties executed a Deed of Absolute Sale whereby the landowner transferred and conveyed the subject property to Samahang Pinagbuklod-Esna Homeowners' Association, Inc. at an agreed price of One Million Eight Hundred Thirty Eight Thousand Eight Hundred Ninety Five Pesos (P1,838,895.00). Pursuant to the certification issued by SHFC, the property covered by TCT No. T-206906 is actually a Community Mortgage Program (CMP) Project and shall be proportionately distributed to the association's qualified member-beneficiaries. 2 For this purpose, Samahang Pinagbuklod-Esna 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) under SHFC Letter-Guaranty LOG No. 0960 dated March 4, 2014 in the amount of P1,833,836.05. Documentary Stamp Tax (DST) due on the sale has been paid on March 20, 2014. ECSHAD In support of its request, Samahang Pinagbuklod-Esna Homeowners' Association, Inc. has completely submitted on April 11, 2014 the following documents: 1) SHFC letter application for tax exemption; 2) Certification of the President of the SHFC that the subject properties qualifies and are actually a CMP project; 3) Certified true copy of the Letter-Guaranty; 4) Certified true copy of the Deed of Absolute Sale to the Community Association; 5) Certified true copy of the Articles of incorporation of the Community Association; 6) Certified true copy of the Masterlist of Qualified Beneficiaries duly certified by the SHFC; 7) Certified true copies of the TCT and Latest Tax Declaration of the Property Sold to the Community Association; 8) Certified true copy of the Location Plan of the Lot Sold to the Community Association; 9) TIN ID/BIR Certificate of Registration of the seller and the Homeowner Association; and 10) 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" DaScAI 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 Samahang Pinagbuklod-Esna Homeowners' Association, Inc. of the property covered by TCT No. T-206906 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 Certificates 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 properties, to the effect that the said properties 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 properties 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) Moreover, under Section 109 (1) (P) of the Tax Code, as amended by R.A. 9337, the sale of real properties utilized for low-cost and socialized housing as defined by R.A. No. 7279 shall be exempt from VAT, thus, the sale of the aforestated property by Esna Financing and Investment Corporation to Samahang Pinagbuklod-Esna Homeowners' Association, Inc. are exempt from the imposition of VAT. (BIR Ruling No. 304-2013 dated August 6, 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 titles 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. ISHCcT 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 Bureau of Internal Revenue ANNEX Samahang Pinagbuklod-Esna Homeowners' Association, Inc. Purok 6, Brgy. San Vicente, Bian, Laguna Name of Beneficiary Blk. No. Lot No. Total Area (Sq.M.) 1 Agutep, Raymond L. 1 1 46.42 2 Agutep, Rizaldy L. 1 2 49.16 3 Avelino, Mary Grace A. 1 3 34.14 4 Agutep, Randy L. 1 4 34.14 5 Agutep, Marilou L. 1 5 34.14 6 Castillo, Marites L. 1 6 34.14 7 Agutep, Ronaldo L. 1 7 34.14 8 Espao, Arturo, Jr. C 1 8 34.14 9 Espeleta, Hilda M. 1 9 34.14 10 Cruz, Luisito, Jr. C. 1 10 34.14 11 Bautista, Hilario Q. 1 11 34.14 12 Almarinez, Mary Grace J. 1 12 34.14 13 Expectacion, Fatima L. 1 13 34.14 14 Bautista, Lorna L. 2 1 43.69 15 Lopena, Lenie Lei A. 2 2 34.14 16 Rostata, Larry A. 2 3 34.14 17 Lopena, Ma. Liwayway A. 3 1 34.14 18 Agutep, Michael L. 3 2 38.23 19 Escueta, Edwin G. 3 3 39.60 20 Agutep, Ruel L. 3 4 34.14 21 Margelino, Rodelio C. 3 5 34.14 22 Cario, Lenie E. 4 1 34.14 23 Marfori, Rhoward B. 4 2 38.23 24 Sarcia, Reyzaldo Y. 4 3 34.14 25 Escueta, Sonia C. 4 4 34.14 26 Ciruelos, Rodolfo, Jr. C. 4 5 34.14 27 Sarcia, Catherine Y. 4 6 34.14 28 Velarde, Silvestre B. 4 7 34.14 29 Cario, Lauro K. 4 8 34.14 30 Polintan, Marilyn L. 4 9 34.14 31 Agutep, Mauro, Jr. L. 4 10 34.14 32 Rostata, Catherine A. 4 11 43.69 33 Alvez, Jovito C. 5 1 34.14 34 Asinas, Marites C. 5 2 34.14 35 Mercado, Alvin Q. 5 3 34.14 36 Unay, Loida M. 5 4 47.79 37 Carpena, Lanisa I. 5 5 40.96 38 Evasco, Sharon C. 5 6 40.96 39 Marfori, Arianne B. 5 7 40.96 Footnotes 1. Formerly: Esna Lending Investors, Inc. 2. See Annex for the masterlist of qualified beneficiaries.