BIR Ruling No. 379-14

October 8, 2014 BIR RULING NO. 379-14 RA No. 7279; BIR Ruling No. 109-13; BIR Ruling No. 304-13 Innovation Ville Phase III Homeowners Association, Inc. Brgy. Pooc, Sta. Rosa, Laguna Attention: Antonio P. Banogon 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 III 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 a parcel of land, identified as Lot 768 of Sta. Rosa Estate, LRC Rec. No. 8375 covered by Transfer Certificate of Title (TCT) No. T-297702 issued by the Registry of Deeds for the Calamba Branch. The aforesaid property is situated at Brgy. Pooc, Sta. Rosa, Laguna with an area of Thirty Four Thousand One Hundred Seventy Three square meters (34,173 sq.m.), more or less. Innovation Ville Phase III Homeowners Association, Inc. (TIN 284-723-259-000), 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 III Homeowners Association, Inc., represented by its President, Antonio P. Banogon, executed a Deed of Absolute Sale whereby the former transferred and conveyed Four Thousand Nine Hundred Seventy Six square meters (4,976 sq.m.) portion of the subject property to Innovation Ville Phase III Homeowners Association, Inc. at an agreed price of Three Million Nine Hundred Eighty Thousand Eight Hundred Pesos (P3,980,800.00) under Community Mortgage Program (CMP) of the SHFC. Pursuant to the certification issued by SHFC, 4,976 sq.m. out of 34,173 sq.m. covered by TCT No. T-297702 actually comprise a CMP Project and shall be proportionately distributed to the association's qualified member-beneficiaries. 1 For this purpose, Innovation Ville Phase III 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 29, 2014. ICDcEA In support of its request, Innovation Ville Phase III 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" SaCDTA 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 III Homeowners Association, Inc. of the Four Thousand Nine Hundred Seventy Six square meters (4,976 sq.m.) portion out of Thirty Four Thousand One Hundred Seventy Three square meters (34,173 sq.m.) covered by TCT No. T-297702 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 4,976 sq.m. portion out of 34,173 sq.m. covered by TCT No. T-297702 by the landowner to Innovation Ville Phase III 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. aATHES 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 III Homeowners Association, Inc. Brgy. Pooc, Sta. Rosa, Laguna Name of Beneficiary Blk. No. Lot No. Total Area (Sq.M.) 1 Monterico, Amely P. 17 35 60.48 2 Conversion, Cerecio D. 34 60.48 3 Sulapas, Raneth S. 36 60.48 4 Pedernal, Estelita R. 37 60.48 5 Monges, Renante D. 38 60.48 6 Fabricante, Ludevina M. 39 60.48 7 Villareal, Jerry K. 40 60.48 8 Japson, Dante A. 41 60.48 9 Binza, Alma M. 42 60.48 10 Pedernal, Ponciano R. 43 65.02 11 Collantes, Jhopet G. 44 60.48 12 Quirog, Gene M. 45 60.48 13 Mascarias, Wilfredo 46 60.48 14 Clarus, Mary Jane A. 47 60.48 15 Velante, Menandro R. 48 60.48 16 Mission, Joylene A. 49 60.48 17 Suligan, Cristopher D. 50 60.48 18 Ilao, Menchie M. 52 60.48 19 Suligan, Cristy D. 53 60.48 20 Jaolan, Jerusa R. 54 60.48 21 Jaolan, Ryan R. 55 65.02 22 Nacor, Gemma B. 4 29 60.48 23 Sombilon, Philip D. 30 60.48 24 France, Ryan M. 31 60.48 25 Fullante, Ariel M. 32 60.48 26 Bogayan, Melbert S. 33 81.65 27 Maranan, Maila T. 34 68.05 28 Jaolan, Antonio D. 35 80.14 29 Batac, Eric D. 39 15 65.02 30 Villarin, Eleuterio C. 16 65.02 31 Otadora, Alex T. 17 60.48 32 Leosola, Evelyn M. 18 60.48 33 Recaa, Constancia R. 19 60.48 34 Palaa, Elena P. 20 60.48 35 Macarilay, Mario D. 21 60.48 36 Orcales, Richelyn C. 22 60.48 37 Semblante, Jonathan 23 60.48 38 Castro, Carlo 24 60.48 39 Palaa, Aldwin 25 60.48 40 Pascua, Reden C. 26 60.48 41 Pascua, Roderick C. 27 60.48 42 Pascua, Reynalyn C. 28 60.48 43 Magdaraog, Ernesto Jr. A. 29 60.48 44 Escao, Edmund S. 30 60.48 45 Colobong, Porlyn M. 31 60.48 46 Caparas, Annalene C. 32 60.48 47 Digamon, Gil 33 58.97 48 Samson, Alvin 34 60.48 49 Ramada, Zenaida A. 35 63.51 50 Bernabe, Samson R. 36 63.51 51 Villarico, Myrna R. 37 68.05 52 Villarico, Antonio Jr. C. 38 63.51 53 Tamayo, Alex V. 40 14 55.95 54 Carrasco, Ruel E. 15 60.48 55 Villanosa, Emelinda B. 16 55.95 56 Montas, Phoebe M. 17 60.48 57 Salem, Micah Pergilyn L. 18 55.95 58 Rivera, May Ann S. 19 55.95 59 Sierra, Michael R. 20 60.48 60 Barro, Fe E. 21 57.46 61 Santos, Marisa M. 22 60.48 62 Townley, Joann M. 23 57.46 63 Magpili, Ramoncito C. 24 65.02 64 Nardo, Rene M. 25 65.02 65 Deloso, Meliton 26 60.48 66 Macosta, Jiorma B. 27 60.48 67 Abucejo, Ciriaco, Jr. L. 28 60.48 68 Lahoy-lahoy, Ernesto R. 29 60.48 69 Busante, Jenelyn B. 30 60.48 70 Mamaril, Novie Ana N. 31 60.48 71 Cantos, Rosita C. 32 58.97 72 Carpena, Marietta C. 33 60.48 73 Panimbatan, Leticia B. 34 60.48 74 Catindig, Andrew G. 35 58.97 75 Franco, Moreno D. 40 36 60.48 76 Alacre, Nolito M. 37 58.97 77 Alacre, Arvie 38 60.48 78 Villarico, Antonio H. 39 60.48 79 Genodia, Ricardo B. 40 68.05 80 Cordova, Florence A. 41 74.09 81 Limboy, Cecilia O. 42 74.09 Footnotes 1. See Annex for the masterlist of qualified beneficiaries.