BIR Ruling No. 379-13

October 14, 2013 BIR RULING NO. 379-13 RA 7279; BIR Ruling No. 066-2011 Hon. Leovino O. Hidalgo Municipal Mayor Municipality of Balete, Batangas Sir : This refers to your letters dated April 8, 2013 and July 9, 2013 requesting tax exemption on the sale transaction between Sps. Hilda K. Benedicto and Ramon S. Benedicto and Municipality of Balete, Batangas in accordance with the Republic Act (RA) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". Documents submitted show Sps. Hilda K. Benedicto and Ramon S. Benedicto (hereinafter referred to as Landowners) are the registered owners of parcels of land covered by two (2) Transfer Certificates of Title (TCT),to wit: TCT No. Area (sq.m.) Tax Declaration No. T-159717 25,371 006-00568 T-159917 461 006-00571 issued by the Registry of Deeds for the Tanauan Batangas. The aforesaid properties are situated at Brgy. Makina, Balete, Batangas. The Municipality of Balete, Batangas, 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/resettlement area for indigent and underprivileged residing near the danger zone areas, thus the Office of the Sangguniang Bayan adopted Resolution (Res) No. 031-2013. On July 10, 2013, a Deed of Absolute Sale of Real Properties was executed by and between the Landowners and The Municipality of Balete, Batangas transferring the subject realties in consideration for Ten Million Three Hundred Thirty Two Thousand Eight Hundred pesos (P10,332,800.00). acSECT In reply, please be informed that pursuant to Section 20 of 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 used 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. 2-98, as amended, on the conveyance of the parcel of land for use in the aforesaid socialized housing project. (BIR Ruling No. 066-2011 dated March 9, 2011) Moreover, under Section 109 (1) (P) of the Tax Code, as amended by RA No. 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 properties by the landowners to The Municipality of Balete, Batangas are exempt from the imposition of VAT. cdll 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 is to be applied or is 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 property transferred, considering that one of the contracting parties is the Government. 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 land 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. 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