BIR Ruling No. 378-14

October 8, 2014 BIR RULING NO. 378-14 RA No. 7279; BIR Ruling No. 109-13; BIR Ruling No. 304-13 Innovation Ville Phase II Homeowners Association, Inc. Brgy. Pooc, Sta. Rosa, Laguna Attention: Marlon S. Diongco President Gentlemen : This refers to the letter of Ma. Ana R. Oliveros, President of Social Housing Finance Corporation (SHFC) dated June 10, 2014, endorsing the sale transaction between Fortune Savings and Loan Association, Inc. and Innovation Ville Phase II 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 Fortune Savings and Loan Association, Inc. (TIN 000-586-276-000) (hereinafter referred to as Landowner) is the registered owner of two (2) parcels of land covered by two (2) Transfer Certificates of Title (TCT), to wit: TCT No. Lot No. Tax Declaration No. Area (Sq. M.) T-297702 768 11-0014-01122 34,173 T-309910 2143-D 11-0014-03213 34,039 Total Area 68,212 ====== all issued by the Registry of Deeds for the Calamba Branch. The aforesaid properties are situated at Brgy. Pooc, Sta. Rosa, Laguna. Innovation Ville Phase II Homeowners Association, Inc. (TIN 284-722-814-000), on the other hand, is a homeowner's organization registered with the Housing and Land Use Regulatory Board (HLURB). On February 21, 2014, Fortune Savings and Loan Association, Inc., duly represented by its Statutory Liquidator, the Philippine Deposit Insurance Corporation (PDIC) and Innovation Ville Phase II Homeowners Association, Inc. represented by its President, Marlon S. Diongco, executed a Deed of Absolute Sale whereby the former transferred and conveyed Fourteen Thousand Fifty Three square meters (14,053 sq.m.) portion of the subject properties to Innovation Ville Phase II Homeowners Association, Inc. at an agreed price of Eleven Million Two Hundred Forty Two Thousand Four Hundred Pesos (P11,242,400.00) under Community Mortgage Program (CMP) of the SHFC. Pursuant to the certification issued by SHFC, 14,053 sq.m. out 68,212 sq.m. covered by TCT Nos. T-297702 and T-309910 actually comprise a CMP Project and shall be proportionately distributed to the association's qualified member-beneficiaries. 1 For this purpose, Innovation Ville Phase I 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 April 3, 2014. aDHCAE In support of its request, Innovation Ville Phase II Homeowners Association, Inc. has completely submitted on June 20, 2014 the following documents: 1) SHFC letter application for tax exemption; 2) Certification of the President of the SHFC that the subject properties actually comprise 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 Properties 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" HaDEIc 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 Innovation Ville Phase II Homeowners Association, Inc. of the Fourteen Thousand Fifty Three square meters (14,053 sq.m.) portion out of Sixty Eight Thousand Two Hundred Twelve square meters (68,212 sq.m.) covered by TCT Nos. T-297702 and T-309910 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 of 1997, 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 14,053 sq.m. portion out of 68,212 sq.m. covered by TCT Nos. T-297702 and T-309910 by the landowner to Innovation Ville Phase II Homeowners Association, Inc. is 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. DCTHaS 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 Innovation Ville Phase II Homeowners Association, Inc. Brgy. Pooc, Sta. Rosa, Laguna Name of Beneficiary Blk. No. Lot No. Total Area (Sq.M.) 1 Dagumbal, Bernadette Z. 38 2 75.35 2 Castro, Joel D. 38 3 75.35 3 Alinsod, Romano A. 38 4 75.35 4 Non, Johnson M. 38 5 75.35 5 Cario, John Romeo A. 38 6 75.35 6 Cantiga, Rhea N. 38 7 75.35 7 Asprec, Mary Jean F. 38 8 75.35 8 Baldon, Alvin SD. 38 9 75.35 9 Tafgar, Gilda T. 38 10 75.35 10 Cario, Maria Victoria A. 38 11 75.35 11 Bayani, Benedick P. 38 12 75.35 12 League, Ma. Cecilia P. 38 13 75.35 13 San Lorenzo, Ernesto A. 38 14 75.35 14 League, Luzviminda P. 38 15 75.35 15 Sabalsa, Benjamin B. 38 16 75.35 16 Amalin, Jasmin L. 38 17 75.35 17 Velasco, Sairel C. 38 18 75.35 18 League, Randy P. 38 19 75.35 19 San Pedro, Jean D. 38 20 75.35 20 Francisco, April G. 38 21 75.35 21 Lunez, Ramon A. 38 22 75.35 22 Galbis, Janette M. 38 23 75.35 23 Mendoza, Mikeron N. 38 24 85.90 24 Mendoza, Mary Chars N. 38 25 84.39 25 Lopez, Marient M. 38 26 85.90 26 Martinez, Abelardo Jr S. 39 1 100.97 27 Luna, Melinda I. 39 3 75.35 28 Ayunon, Ruby Grace I. 39 4 75.35 29 Icuspit, Izekel M. 39 5 75.35 30 Bayta, Vilma B. 39 6 75.35 31 Icuspit, Albert O. 39 7 75.35 32 Lopez, Ronald S. 39 8 75.35 33 Llaneta, Alex V. 39 9 75.35 34 Somo, Analyn H. 39 10 75.35 35 Beo, Corazon N. 39 11 75.35 36 Saludo, Loida P. 39 12 75.35 37 Lunez, Mario A. 39 13 75.35 38 Bao, Ofelia P. 39 14 75.35 39 Pedernal, Joel R. 40 1 91.93 40 Martinez, Cherry Lyn L. 40 2 73.84 41 Gilo, Renato G. 40 3 75.35 42 Portillo, Rodelio O. 40 4 73.84 43 Ilo, Teodoro L. 40 5 75.35 44 Portillo, Dominador O. 40 6 75.35 45 Umali, Hazel U. 40 7 75.35 46 Prenosa, Julie Ann C. 40 8 75.35 47 Almodiel, Ariel A. 40 9 75.35 48 Galit, Evangeline L. 40 10 75.35 49 Cabrera, Arnold P. 40 11 75.35 50 Olviz, Ronald C. 40 12 75.35 51 Lobin, Editha M. 40 13 79.87 52 Blasquillo, Colita C. 17 20 75.35 53 Perez, Sheina P. 17 21 75.35 54 Labog, Edmundo N. 17 22 75.35 55 Gonzales, Joel Sr. P. 17 23 75.35 56 Lachica, Rose Marie A. 17 24 75.35 57 Martinez, Florencio S. 17 25 75.35 58 Martinez, Aerold Keith B. 17 26 75.35 59 Cordova, Julio N. 17 27 75.35 60 Blas, Angelita V. 17 28 75.35 61 Pastidio, Lea L. 17 29 75.35 62 Pastidio, Elmer L. 17 30 75.35 63 Cordova, Argel A. 17 31 75.35 64 Elarmo, Jose S. 17 32 75.35 65 Fermanes, Zny GS. 17 33 75.35 66 Diongco, Marlon S. 37 1 73.84 67 Almodiel, Gemma B. 37 2 75.35 68 Tampalon, Gloria L. 37 3 75.35 69 Acosta, Joseph G. 37 4 73.84 70 Presto, Ceferino P. 37 6 75.35 71 Badiola, Generoso G. 37 7 75.35 72 Arenas, Jonathan U. 37 8 75.35 73 Nagasaka, Marissa R. 37 9 75.35 74 Cernal, Josieleth A. 37 10 75.35 75 Agapito, Janeth Q. 37 11 75.35 76 Arias, Domingo B. 37 12 75.35 77 Pabellosa, Nelia B. 37 13 75.35 78 Padilla, Auryn P. 37 14 75.35 79 Savalande, Virgie C. 37 15 75.35 80 Tafgar, Rafael T. 37 16 75.35 81 Pea, Ma. Jona L. 37 17 75.35 82 Degorio, Nonito D. 37 18 75.35 83 Alcaraz, Julito M. 37 19 75.35 84 Almonia, Eunice M. 37 20 75.35 85 Gemoto, Bernadette G. 37 21 75.35 86 Raymundo, Arnold B. 37 22 75.35 87 Villacote, Luis Jr. V. 37 23 75.35 88 Aonuevo, Saldy Q. 37 24 75.35 89 Casimsiman, Cris T. 37 25 75.35 90 Caparros, Aime E. 37 26 75.35 91 Fadul, Bernardito Jr. C. 37 27 75.35 92 Dela Cruz, Diana Marie S. 37 28 75.35 93 Sombillon, Warren N. 37 29 75.35 94 Montalbo, Anna May D. 37 30 150.70 95 Pantoja, Christopher L. 37 32 75.35 96 Pantoja, Anacleto Jr. R. 37 33 75.35 97 Cena, Mariel M. 37 34 75.35 98 Valdenarro, Chatyilyn O. 37 35 75.35 99 Barbacal, Lilibeth O. 37 36 75.35 100 Estrada, Minerva S. 22 1 75.35 101 Llaneta, Rowena R. 22 2 75.35 102 Esber, Daniel N. 22 3 75.35 103 Esber, Annaliza L. 22 4 75.35 104 Siena, Greg S. 22 5 75.35 105 Reyes, Jacquilyn G. 22 6 75.35 106 Macedonio, Alma P. 22 7 75.35 107 Nuez, Violy B. 22 8 75.35 108 Villora, Analyn D. 22 9 75.35 109 Carrabido, Raymond U. 22 10 75.35 110 Gondraneous, Edwin B. 22 11 75.35 111 Santos, Haidi A. 22 12 75.35 112 Aquino, Analiza M. 22 13 75.35 113 Mediavillo, Jennifer R. 22 14 75.35 114 Gatela, Jennelyn O. 22 15 75.35 115 Neric, Jocelyn B. 22 16 75.35 116 Decembriano, Allan C. 22 17 75.35 117 Tafgar, Glenda T. 22 18 75.35 118 Cabus, Regie B. 22 19 75.35 119 Boton, Rowena B. 22 20 75.35 120 Presto, Eleanor A. 22 21 75.35 121 Maisa, Yolanda A. 22 22 75.35 122 Zamora, Pedro I. 22 23 75.35 123 Annonuevo, Ma. Cecilla M. 22 24 75.35 124 Alinio, Miguela D. 22 25 75.35 125 Barredo, Reynaldo C. 22 26 75.35 126 Rosales, Jennefer V. 22 27 75.35 127 Bagnol, Analyn M. 22 28 75.35 128 Echano, Rey G. 22 29 75.35 129 Diongco, Marvin S. 22 30 75.35 130 Bagnol, Jovielyn O. 22 31 75.35 131 Buendia, Roderick G. 22 32 75.35 132 Reyes, Glendalin T. 22 33 75.35 133 Gabriel, Ariel M. 22 34 75.35 134 Gumahad, Gaudencio Jr. A. 22 35 75.35 135 Mendeja, Anjela D. 22 36 76.86 136 Duron, Fernando G. 23 1 75.35 137 Laplana, Marieta A. 23 2 75.35 138 Roco, Anilyn O. 23 3 75.35 139 Postre, Gernando M. 23 4 75.35 140 Anabieza, Arman P. 23 5 75.35 141 Gonzaga, Rundy S. 23 6 75.35 142 Sabalsa, Estrelita B. 23 7 75.35 143 Dogelio, Joel B. 23 8 75.35 144 Licda, Arnel A. 23 9 75.35 145 Dulosa, Divina Joy B. 23 10 75.35 146 Del Pilar, Aron Mark M. 23 11 75.35 147 Elarmo, Jocelyn G. 23 12 75.35 148 Malabo, Lope A. 23 13 75.35 149 Boto, Francia C. 23 14 75.35 150 Cortez, Ramona M. 23 15 75.35 151 Azuela, Joana H. 23 16 75.35 152 Valencia, Leny D. 23 17 75.35 153 Dones, Romel D. 23 18 75.35 154 Balansag, Jeanette P. 23 19 75.35 155 Del Mundo, Riyadhji P. 23 20 75.35 156 De Leon, Rene I. 23 21 75.35 157 Tafgar, Cristobal T. 23 22 75.35 158 Abona, Emalinda A. 23 23 75.35 159 France, Lowin M. 23 24 75.35 160 Baldon, Armando Jr. V. 23 25 75.35 161 Dipasupil, Maria Cecilia S. 23 26 75.35 162 Bartolini, Feliciano C. 23 27 75.35 163 Castillo, Rolando M. 23 28 75.35 164 Regondola, Allan C. 23 29 75.35 165 Camarines, Joenel A. 23 30 75.35 166 Licup, Allan B. 23 31 75.35 167 Dela Rosa, Patrick S. 23 32 75.35 168 Batain, Lilybeth J. 23 33 75.35 169 Kadusale, Gerry P. 23 34 75.35 170 Kadasule, Danilo B. 23 35 75.35 171 Dimaano, Gene S. 23 36 78.37 172 Mendoza, Raymond B. 4 19 75.35 173 Bautista, Marites R. 4 20 75.35 174 Magpali, Richard R. 4 21 75.35 175 Santos, Rey D. 4 22 81.38 176 Ambos, Highnoon M. 4 23 78.37 177 Bugayong, Reizel B. 4 24 75.35 178 Pedragoza, Heidi A. 4 25 75.35 179 Gloria, Maria Louisa D. 4 26 75.35 180 Queliza, Junez E. 4 27 75.35 181 Gicole, Marilou A. 4 28 79.87 182 Acosta, Cristina G. 39 2 99.46 183 Hernandez, Joselito M. 37 31 150.70 Footnotes 1. See Annex for the masterlist of qualified beneficiaries.