BIR Ruling No. 381-14

October 8, 2014 BIR RULING NO. 381-14 RA No. 7279; BIR Ruling No. 109-13 Tayud Mountainview Homeowners Association, Inc. Sitio East Binabag, Brgy. Tayud, Consolacion, Cebu Attention: Rodney D. Maguyon President Gentlemen : This refers to the letter of Ma. Ana R. Oliveros, President of Social Housing Finance Corporation (SHFC) dated March 19, 2014, endorsing the sale transaction between Godofredo Pepito, et al. and Tayud Mountainview 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 the following are the registered owners of a parcels of land, to wit: Landowners Transfer Certificate of Area Title (TCT) No. (Sq.M.) Godofredo Pepito TP-23725 727 Alejandra Pepito 1 TP-23726 727 Rodrigo Pepito 2 TP-23728 727 Visitacion Pepito 3 TP-23729 727 2,908 ===== issued by the Registry of Deeds of Province of Cebu. The aforesaid properties are situated at Brgy. Tayud, Consolacion, Cebu. Tayud Mountainview Homeowners Association, Inc. (TIN 264-290-968-000), on the other hand, is a homeowner's organization duly registered with the Housing and Land Use Regulatory Board (HLURB). On September 30, 2013, the parties executed a Deed of Absolute Sale whereby the Landowners transferred and conveyed Two Thousand Three Hundred Ninety Four and 89/100 square meters (2,394.89 sq.m.) of the subject property to Tayud Mountainview Homeowners Association, Inc. at an agreed price of Four Million Twenty Three Thousand Four Hundred Fifteen and 20/100 Pesos (P4,023,415.20). Pursuant to the certification issued by SHFC, Two Thousand Three Hundred Ninety Four and 89/100 square meters (2,394.89 sq.m.) out of Two Thousand Nine Hundred Eight square meters (2,908 sq.m.) covered by TCT Nos. TP-23725, TP-23726, TP-23728 and TP-23729 actually comprise a Community Mortgage Program (CMP) Project and shall be proportionately distributed to the association's qualified member-beneficiaries. 4 For this purpose, Tayud Mountainview 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 January 24, 2014. ADCSEa In support of its request, Tayud Mountainview Homeowners Association, Inc. has completely submitted on May 9, 2014 the following documents: 1) SHFC letter application for tax exemption; 2) Certification of the President of the SHFC that the subject property qualifies and is 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" ADCEaH 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 landowners to Tayud Mountainview Homeowners Association, Inc. of Two Thousand Three Hundred Ninety Four and 89/100 square meters (2,394.89 sq.m.) portion of the properties covered by TCT Nos. TP-23725, TP-23726, TP-23728 and TP-23729 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 Certificate 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 property, to the effect that the said property 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 landowners are liable to pay the documentary stamp tax on the document conveying the afore-stated property 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) 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 title 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. 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. EHSCcT Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner Bureau of Internal Revenue ANNEX Tayud Mountainview Homeowners Association, Inc. Sitio East Binabag, Brgy. Tayud, Consolacion, Cebu Name of Beneficiary Blk. No. Lot No. Total Area (Sq.M.) 1 Castor, Louienyl 1 1 50.12 2 Casibua Sr., Sergio 2 50.12 3 Jemerino, Evangeline 3 50.12 4 Paquibot, Ihlyn 4 50.12 5 Malinao, Danilo 5 50.12 6 Malinao, Dennis 6 40.57 7 Ponsica, Edwin 8 50.12 8 Manigos, Cireno 2 1 50.12 9 Pepito, Evelyn 2 50.12 10 Pepito, Edgar 3 50.12 11 Rebutaso, Marian Joy 4 50.12 12 Zapanta, Samuel 5 50.12 13 Pasay, Arlene 6 50.12 14 Alferez, Conrado 7 33.41 15 Lauron, Emergito 8 33.41 16 Montes, Charito 9 35.80 17 Montes, Giesell Joy 10 35.80 18 Montes, Alister 11 45.34 19 Ferenal, Clarita 13 50.12 20 Ferenal, James Archer 14 50.12 21 Henoguin, Mary Wengie 15 50.12 22 Abuna, Mary Lou 16 50.12 23 Abuna, Laura 17 50.12 24 Alone, Rey Nia 19 46.54 25 Alone, Fredes Winda 20 41.76 26 Solis, Emalyn 3 1 50.12 27 Mahinay, Norberto 2 50.12 28 Villamor, Victoria 3 50.12 29 Lim, Almacita 4 50.12 30 Abbu Jr., Bernardo 5 44.15 31 Abbu, Jennifer 6 48.92 32 Beduya, Rolando 4 1 35.80 33 Himar, Allan 2 38.18 34 Silvestre, Nicanor 3 50.12 35 Monte De Ramos, May Ann 4 50.12 36 Rosellosa, Pedro 5 56.08 37 Mahinay, Merlinda 6 50.12 38 Garces, Leomel 9 46.54 39 Garces, Mariji 10 39.38 40 Garces, Joy 11 50.12 41 Andojar, Thelma 12 50.12 42 Boquecosa, Barbara Jinx 13 50.12 43 Garces, Mary Joy 14 51.31 44 Hortezuela, Charina 15 42.96 45 Ortiz, Mario Marcelo 18 36.99 46 Inso, Dindo 19 38.18 47 Guingguing, Peter 20 50.12 48 Maguyon, Rodney 21 50.12 49 Handumon, Dunamie 22 50.12 50 Bustamante, Tamtilo 23 50.12 51 Bontuyan, Vicky 24 50.12 Footnotes 1. Married to Felix Auman. 2. Married to Leonila Pepito. 3. Married to Rodolfo Trangia. 4. See Annex for the masterlist of qualified beneficiaries.