BIR Ruling No. 377-14

October 8, 2014 BIR RULING NO. 377-14 RA No. 7279; BIR Ruling No. 109-13; BIR Ruling No. 304-13 Riverside Urban Poor Homeowners Association, Inc. Brgy. Sambag I, Cebu City Attention: Mario C. Tabaag President Gentlemen : This refers to the letter of Ma. Ana R. Oliveros, President of Social Housing Finance Corporation (SHFC) dated February 27, 2014, endorsing the sale transaction between P. Larrazabal & Sons Enterprises, Inc. and Riverside Urban Poor 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 P. Larrazabal & Sons Enterprises, Inc. (TIN 000-905-170-003) (hereinafter referred to as Landowner) is the registered owner of the following parcels of land: TCT No. Area (Sq. M.) Tax Declaration No. 69295 1,077 GRC6-05-032-02605 69296 1,077 GRC6-05-032-02629 69769 697 GRC6-05-032-02625 69298 2,091 GRC6-05-032-02636 69297 1,077 GRC6-05-032-02630 63575 4,089 GRC6-05-032-02711 10,108 ===== all issued by the Registry of Deeds for City of Cebu. The aforesaid properties are situated at Sambag I, Cebu City. Riverside Urban Poor Homeowners Association, Inc. (TIN 257-354-195-000), on the other hand, is a homeowner's organization registered with the Housing and Land Use Regulatory Board (HLURB) under Certificate of Registration No. 01799. On November 7, 2013, P. Larrazabal & Sons Enterprises, Inc., duly represented by Dr. Potenciano U. Larrazabal, and Riverside Urban Poor Homeowners Association, Inc., represented by Mario C. Tabaag, executed a Deed of Absolute Sale whereby the former transferred and conveyed Seven Thousand Nine Hundred Five and 92/100 square meters (7,905.92 sq.m.) portion of the subject properties to Riverside Urban Poor Homeowners Association, Inc. at an agreed price of Thirteen Million Four Hundred Forty Thousand Sixty Four and 46/100 Pesos (P13,440,064.46). Pursuant to the certification issued by SHFC, Seven Thousand Nine Hundred Five and 92/100 square meters (7,905.92 sq.m.) out of Ten Thousand One Hundred Eight square meters (10,108 sq.m.) covered by TCT Nos. 69295, 69296, 69769, 69298, 69297 and 63575 are actually a Community Mortgage Program (CMP) Project and shall be proportionately distributed to the association's qualified member-beneficiaries. 1 For this purpose, Riverside Urban Poor 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 December 3, 2013. HcSaTI In support of its request, Riverside Urban Poor Homeowners Association, Inc. has completely submitted on May 30, 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" EAISDH 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 Riverside Urban Poor Homeowners Association, Inc. of the Seven Thousand Nine Hundred Five and 92/100 square meters (7,905.92 sq.m.) portion of the properties covered by TCT Nos. 69295, 69296, 69769, 69298, 69297 and 63575 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 value-added tax (VAT), thus, the sale of the Seven Thousand Nine Hundred Five and 92/100 square meters (7,905.92 sq.m.) portion of the properties covered by TCT Nos. 69295, 69296, 69769, 69298, 69297 and 63575 by P. Larrazabal & Sons Enterprises, Inc. to Riverside Urban Poor 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) IDSaAH 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. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner Bureau of Internal Revenue ANNEX Riverside Urban Poor Homeowners Association, Inc. Brgy. Sambag I, Cebu City Name of Beneficiary Blk. No. Lot No. Total Area (Sq.M.) 1 Valiente, Junalie E. 1 2 51.08 2 Duran, Clavil E. 1 3 51.08 3 Pilario, Elmer P. 1 4 51.08 4 Pilario, Jerome E. 1 5 49.66 5 Villacarlos, Geraldine G. 1 6 34.05 6 Villacarlos, Rachelle G. 1 7 32.63 7 Villegas, James II P. 1 8 45.40 8 Arnoco, Jon P. 1 10 43.98 9 Patio, Joan A. 1 11 36.89 10 Caranzo, Consorsia A. 1 12 35.47 11 Baynosa, Marie Joy D. 1 13 32.63 12 Baynosa, Marites R. 1 14 29.80 13 Garbo, Carmelita T. 1 15 38.31 14 Ang, Lydia L. 1 16 42.57 15 Vargas, Renz Cesar O. 1 18 48.24 16 Valiente, Arnold E. 1 19 48.24 17 Balansag, James Ray A. 1 20 35.47 18 Dacuyan, Learny S. 1 21 34.05 19 Co, Elizabeth V. 1 22 42.57 20 Viscarra, Felixberto A. 1 23 49.66 21 Cabal, Gemma V. 1 26 45.40 22 Tatoy, Rolando G. 1 27 36.89 23 Daclan, Marcelino Jr. L. 1 28 55.34 24 Esparcia, Tertuliano R. 1 29 38.31 25 Filipino, Wilma Y. 1 30 56.75 26 Anion, Pio R. 1 31 25.54 27 Acibo, Gemelito O. 1 32 35.47 28 Geronda, Jefferson L. 1 33 25.54 29 Montes, Michael G. 1 34 25.54 30 Gabucan, Lily Ann C. 1 35 41.15 31 Ilarde, Dina G. 1 36 28.38 32 Ilarde, Divida G. 1 37 29.80 33 Baquiano, Rebecca S. 1 38 55.34 34 Gerunda, Teodoro L. 1 39 39.73 35 Roxas, Emma E. 1 40 32.63 36 Saavedra, Jeannifer P. 1 41 39.73 37 Talledo, Camilo L. 1 42 34.05 38 Talledo, Virginia L. 1 43 29.80 39 Roxas, Angellope E. 1 44 45.40 40 Rusiana, Roselyn C. 1 45 34.05 41 Bernales, John Kirby D. 1 46 39.73 42 Rojas, Bridget Johanna L. 1 48 65.27 43 Serenio, Marie Frances S. 2 1 45.40 44 Villona, Evanie M.I. 2 3 34.05 45 King, Elizabeth G. 2 4 48.24 46 King, Karen Leah G. 2 5 48.24 47 Serenio, Edwin S. 2 6 39.73 48 King, Cirila G. 2 7 48.24 49 Medez, Elisa D. 2 8 26.96 50 Oporto, Jeffs P. 2 9 25.54 51 Misamis, Maricris M. 2 10 32.63 52 Cuico, Rocelyn E. 2 11 48.24 53 Gabucan, Julius T. 2 12 43.98 54 Guitones, Lucendo R. 2 13 35.47 55 Cabido, Carenme G. 2 14 45.40 56 Ilarde, Diana G. 2 15 49.66 57 Belarmino, Teodoro C. 2 18 45.40 58 Oyangoren, Maria Fe C. 2 23 45.40 59 Abellana, John Normandy A. 2 25 48.24 60 Abellana, Armando D. 2 26 52.50 61 Juntilla, Roberto N. 2 28 38.31 62 Juntilla, Elvira Q. 2 29 46.82 63 Serenio, Gerardo S. 2 30 52.50 64 Serenio, Nick M. 2 31 58.17 65 Serenio, Jefferson S. 2 33 25.54 66 Neri, Margarita S. 2 34 42.57 67 Serenio, Genalyn M. 2 35 62.43 68 Magno, Eutiquio Jr. V. 2 36 51.08 69 Serenio, Jessie M. 2 37 46.82 70 Serenio, Annaliza M. 2 38 42.57 71 Magno, Michelle B. 2 39 45.40 72 Gotingco, Ribomapil B. 2 41 49.66 73 Magdali, Mercedita N. 2 42 39.73 74 Cualquiera, Mark Anthony N. 2 43 28.38 75 Ida, Honeyvir G. 2 44 63.85 76 Torno, Malipayon I. 2 45 48.24 77 Torno, Christian Dave I. 2 46 52.50 78 Indino, Ezra Ramielu R. 2 47 38.31 79 Reyes, Macedonio Jr. S. 2 49 34.05 80 Saquin, Romulo C. 2 51 29.80 81 Navales, Joselito L. 2 52 28.38 82 Amaba, Jaime G. 2 53 29.80 83 Bacalan, Renato D. 2 54 32.63 84 Bacho, Felix M. 2 55 32.63 85 Talledo, Felix C. 2 56 36.89 86 Pedrano, Isabie P. 2 57 38.31 87 Genella, Sherry M. 2 58 31.22 88 Neis, Elizabeth J. 2 60 29.80 89 Potencioso, Edna D. 2 62 34.05 90 Serenio, Remegio S. 2 63 52.50 91 Albert, Che Roland S. 2 64 76.62 92 Serenio, Miralyn V. 2 67 38.31 93 Lavides, Jason B. 3 3 36.89 94 Ranche, Claire E. 3 6 48.24 95 Campomanes, Liezl B. 3 7 35.47 96 Oyangorin, Lordelyn L. 3 8 66.69 97 Villarubia, Analiza G. 3 9 39.73 98 Lupian, Arlene V. 3 10 36.89 99 Punay, Dorotea P. 3 11 46.82 100 Belion, Akila P. 3 12 48.24 101 Ligan, Farrah B. 3 13 35.47 102 Bersabal, Joe Marie B. 3 14 35.47 103 Blanco, Rodolfo M. 3 15 26.96 104 Hemelga, Evangeline B. 3 16 25.54 105 Hemelga, Felicidad B. 3 17 25.54 106 Celocia, Remedios T. 3 18 28.38 107 Escabas, Ann Jaily C. 3 19 25.54 108 Gabato, Sheryll R. 3 20 48.24 109 Alberio, Nel Anthony R. 3 21 46.82 110 Misamis, Ernesto V. 3 22 34.05 111 Gabato, Janice R. 3 23 42.57 112 Gabato, Khuji R. 3 24 35.47 113 Ricafort, Sofia E. 3 25 25.54 114 Bayaton, Edwin S. 3 26 41.15 115 Bayaton, Lennie S. 3 27 39.73 116 Villeta, Rodnie B. 3 29 42.57 117 De Real, Candelaria T. 3 30 73.78 118 De Real, Rosemarie T. 3 31 70.94 119 Togonon, Daylinda M. 3 32 61.01 120 Togonon, Leonardo M. 3 33 58.17 121 Gidayawan, Marissa M. 4 1 34.05 122 Abayan, Bryan L. 4 5 42.57 123 Vistar, Mary Ann A. 4 6 39.73 124 Roma, Michael Q. 4 7 48.24 125 Bartiana, Mary Ann E. 4 8 59.59 126 Matienzo, Emmanuel A. 4 9 48.24 127 Carin, Editha M. 4 14 42.57 128 Gadia, Analiza B. 4 15 32.63 129 Jabagat, Ruby Irene A. 4 16 31.22 130 Aranco, Hector N. 4 17 32.63 131 Seplo, Florinda A. 4 20 28.38 132 Cabase, Emeliza D. 4 21 34.05 133 Llatona, Mario R. 4 22 38.31 134 Maneja, Raul L. 4 23 25.54 135 Roma, Viviana S. 4 24 36.89 136 Ruiz, Joseph N. 4 25 45.40 137 Ruiz, Jezer N. 4 26 35.47 138 Indoy, Leonila T. 4 27 42.57 139 Mamallas, Loryna I. 4 28 42.57 140 Cortuna, Basilisa B. 4 29 51.08 141 Naranja, Avelina E. 5 1 41.15 142 Suico, Agapita B. 5 2 25.54 143 Talledo, Bernardita G. 5 3 45.40 144 Ilarde, David S. 5 5 31.22 145 Wagas, Josenido C. 5 6 31.22 146 Wagas, Joe Leo M. 5 7 31.22 147 Talledo, Dinish R. 5 8 43.98 148 Talledo, Nelson R. 5 9 43.98 149 Talledo, Josephine R. 5 10 46.82 150 Talledo, Rexel R. 5 11 45.40 151 Rojas, Manilyn L. 5 12 59.59 152 Tabaag, Mario C. 5 13 66.69 153 Mendoza, Anita C. 5 14 45.40 154 Raganas, Rolando J. 5 16 32.63 155 Macapaz, Bertolfo A. 5 17 35.47 156 Lucman, Alexander II D. 5 19 25.54 157 Matos, Jenelyn D. 5 20 29.80 158 Dayono, Jessa I. 5 21 25.54 159 Padillo, Rufo O. 5 22 25.54 160 Cainap, Hygeia Bianca M. 5 23 62.43 161 Andrade, Angelica S. 5 24 45.40 162 Andrade, Grace S. 5 25 49.66 163 Murillo, Leonor R. 5 27 25.54 164 Rivera, Jose Bernardo P. 5 28 25.54 165 Bacho, Olympio Jr. M. 5 29 25.54 166 Egoc, Marilyn R. 5 30 53.92 167 Bacho, Melonie M. 5 31 53.92 168 Bacho, Chiqui R. 5 32 36.89 169 Bacho, Juvy R. 5 34 42.57 170 Ompoc, Jerald S. 5 35 32.63 171 Ompoc, Jetro S. 5 36 32.63 172 Bella, Cainap M. 5 37 56.75 173 Surdilla, Victor A. 5 38 25.54 174 Jacalan, Leonora M. 5 39 35.47 175 Lagunay, Lucresia R. 5 40 31.22 176 Abing, Joel G. 5 41 31.22 177 Sumukad, Elwin L. 6 1 42.57 178 Lisondra, Genara C. 6 2 25.54 179 Gambuta, Alberto G. 6 3 26.96 180 Erro, Celsa M. 6 4 41.15 181 Rusiana, Jonafe D. 6 5 25.54 182 Mahilum, Marvin L. 6 6 38.31 183 Benlot, Haydelisa I. 6 7 46.82 184 Casebo, Renaldo S. 6 8 43.98 185 Filipino, Alfredo Y. 6 9 31.22 186 Ramas, Danilo O. 6 11 28.38 187 Flores, Sionilo R. 6 12 34.05 188 Dayangco, Cleofe C. 6 13 38.31 189 Bayno, Juana P. 6 14 25.54 190 Bayno, Milagros P. 6 15 26.96 191 Mejia, Edwin V. 6 17 59.59 192 Tejano, Jenny Y. 6 19 51.08 193 Garbo, Marlon Y. 6 20 28.38 194 Carang, Luzminda B. 6 21 28.38 195 Gacang, Archelito M. 6 22 39.73 196 Sunggayan, Wenceslao Jr. S. 7 1 36.89 Footnotes 1. See Annex for the masterlist of qualified beneficiaries.