BIR Ruling No. 382-14

October 8, 2014 BIR RULING NO. 382-14 RA No. 7279; BIR Ruling No. 109-13 Silangan Neighborhood Homeowners Association, Inc. Brgy. San Vicente, Lilo-an, Cebu Attention: Rudy Y. Andus President Gentlemen : This refers to the letter of Ma. Ana R. Oliveros, President of Social Housing Finance Corporation (SHFC) dated June 27, 2013, endorsing the sale transaction between Crispiniana M. Goc-ong, Marina M. Goc-ong, Rebecca M. Goc-ong and Silangan Neighborhood 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 Crispiniana M. Goc-ong married to Adonis Mangubat, Marina M. Goc-ong married to Marciano Villacencio, Rebecca M. Goc-ong married to Eulogio Libramonte are the registered owners of parcels of land covered by three (3) Transfer Certificates of Title (TCT), to wit: Owner TCT No. Area (Sq.M.) Tax Declaration No. Crispiniana M. Goc-ong TP-19901 997 GR-2008 58437 Marina M. Goc-ong MR-8002 (TP-63844) 897 GR-2008 57233 Rebecca M. Goc-ong TP-19903 996 GR-2008 58438 issued by the Registry of Deeds for Mandaue City with aggregate area of Two Thousand Eight Hundred Ninety square meters (2,890 sq.m.). The aforesaid properties are situated at Brgy. San Vicente, Lilo-an, Cebu. Silangan Neighborhood Homeowners Association, Inc. (TIN 434-559-070-000), on the other hand, is a homeowner's organization registered with the Housing and Land Use Regulatory Board (HLURB). On February 5, 2013, the parties executed a Deed of Absolute Sale whereby the owners transferred and conveyed, Two Thousand One Hundred Seventeen and 67/100 square meters (2,117.67 sq.m.) portion of the subject properties to Silangan Neighborhood Homeowners Association, Inc. at an agreed price of Two Million One Hundred Seventeen Thousand Six Hundred Seventy Pesos (P2,117,670.00). Pursuant to a certification dated February 5, 2013 issued by SHFC, Two Thousand One Hundred Seventeen and 67/100 square meters (2,117.67 sq.m.) out of the total Two Thousand Eight Hundred Ninety square meters (2,890 sq.m.) covered by TCT Nos. TP-19901, MR-8002 (TP-63844) and TP-19903 actually comprise a CMP Project and shall be proportionately distributed to the association's qualified member-beneficiaries. 1 For this purpose, Silangan Neighborhood Homeowners Association, Inc. secured a housing loan under the CMP, a financing assistance program of the Social Housing Finance Corporation a subsidiary of the National Home Mortgage Finance Corporation (NHMFC). IaSAHC In support of its request, Silangan Neighborhood Homeowners Association, Inc. has completely submitted on July 5, 2013 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" TcIAHS 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 Silangan Neighborhood Homeowners Association, Inc. of Two Thousand One Hundred Seventeen and 67/100 square meters (2,117.67 sq.m.) portion of the property covered by TCT Nos. TP-19901, MR-8002 (TP-63844) and TP-19903 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 caused to be annotated by the Register of Deeds having jurisdiction over the property, 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 owners are 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 realties 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 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. Notwithstanding the foregoing, the Bureau of Internal Revenue shall conduct verification and post-audit that the actual occupants of the properties transferred under the CMP are qualified beneficiaries and therefore, the sellers are 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. AaITCS Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner Bureau of Internal Revenue ANNEX Silangan Neighborhood Homeowners Association, Inc. Brgy. San Vicente, Lilo-an, Cebu Name of Beneficiary Blk. No. Lot No. Total Area (Sq.M.) 1 Cahig, Gerry T. 1 1-B 45.67 2 Suello, Josep C. 1 2 45.67 3 Maghuyop, Mylenne S. 1 3 45.67 4 Bihag, Edna P. 1 4 45.67 5 Tolentino, Arnaldo S. 1 5 45.67 6 Yurag, Elme R. 1 6 45.67 7 Escalante, Anecito M. 1 7 45.67 8 Maghuyop, Patrocenia S. 1 8 45.67 9 Sonsona, Arvin Q. 1 10 45.67 10 Estorgio, Escel M. 1 11 45.67 11 Estorgio, Edwin M. 1 12 45.67 12 Tugao, Orly B. 1 13 45.67 13 Dialogo, Fe L. 1 14 45.67 14 Singson, Lorna M. 1 15 45.67 15 Singson, Armistes G. 1 16 45.67 16 Jabagat, Lilian N. 1 17 45.67 17 Namoco, Honorio Jr. M. 1 18 45.67 18 Piape, Marina L. 1 19 45.67 19 Piape, Romeo L. 1 20 45.67 20 Caromayan, Henrick M. 1 21 41.73 21 Caromayan, Hazel M. 1 22 41.73 22 Sierra, Florence J. 1 23 43.04 23 Dahil, Josephine J. 1 24 45.67 24 Jabonero, Neressa L. 1 25 45.67 25 Jabonero, Christian L. 1 26 45.67 26 Jabonero, Rosabella L. 1 27 45.67 27 Jabonero, Theresa L. 1 28 35.21 28 Jabonero, Lester L. 1 29 37.82 29 Caralde, Cristovin M. 2 1 45.67 30 Caralde, Francisco M. 2 2 45.67 31 Fuentes, Rosario R. 2 3 45.67 32 Cahig, Nelma T. 2 4 45.67 33 Cahig, Ralf T. 2 5 45.67 34 Inocando, Nelson C. 2 6 45.67 35 Orbilla, Walter A. 2 7 45.67 36 Orbilla, Juditha A. 2 8 45.67 37 Mosquite, Visminda E. 2 9 45.67 38 Ibias, Odessa A. 2 10 45.67 39 Cahig, Nelma T. 2 11 45.67 40 Sumoda, Rhonalyn A. 2 12 45.67 41 Caromayan, Jonah Rhea L. 2 15 45.67 42 Andus, Rudy Y. 2 16 45.67 43 Malachico, Ma. Merla J. 2 17 45.67 44 Almerez, Vivian C. 2 18 45.67 45 Almerez, Dexter C. 2 19 45.67 46 Jimenez, Levie T. 2 20 45.67 47 Adlawan, Eric C. 2 21 45.67 Footnotes 1. See Annex for the masterlist of qualified beneficiaries.