BIR Ruling No. 383-13

October 22, 2013 BIR RULING NO. 383-13 RA 7279; BIR Ruling No. 005-11; BIR Ruling No. 367-11 Marilou A. Perez Roque Compound II, Kapit Bisig HOA, Inc. Himlayan Road Pasong Tamo Tandang Sora, Quezon City Madam : This refers to your undated letter requesting exemption from the payment of Capital Gains Tax and other taxes, relative to the transfer of title of land from Roque Compound Phase II, Kapit-Bisig Homeowners Association, Inc. in favor of Mr. Peter B. Limas pursuant to Republic Act 7279 otherwise known as the "Urban Development and Housing Act of 1992". It is represented that Roque Compound Phase II, Kapit-Bisig Homeowners Association, Inc. is the registered owner of the parcel of land identified n Lot 5, Block 1, of the subdivision plan Psd-00-063161, being a portion of Lot 877-C-3 (LRC) Psd-1856, LRC Record No. 5975 containing an area of forty six and 87/100 square meters (46.87 sq.m.) covered by Transfer Certificate of Title (TCT) No. N-285574 issued by the Registry of Deeds for the Quezon City, located at Brgy. Pasong Tamo, Tandang Sora, Quezon City; that it is a non-stock, non-profit organization duly registered with the Housing and Land Use Regulatory Board (HLURB); that the aforesaid lot was acquired through a loan under the Community Mortgage Program (CMP) of the Social Housing Finance Corporation (SHFC); that said project was taken-out/paid on June 18, 1998 in the amount of Php1,000,000.00 involving thirty one (31) beneficiaries; that Mr. Peter B. Limas substituted Mr. Edwin Miraflor as member-beneficiary of the Association which was approved by SFHC; that the SHFC issued a Partial Release of Real Estate Mortgage constituted described in TCT No. N-285574 dated June 27, 2011; and that Mr. Peter B. Limas is now in the process of transferring the purchased property to his name by virtue of a Deed of Sale dated September 13, 2011. In support of your request, you have completely submitted on January 25, 2013 the following documents: 1) Written Application for Exemption filed with the Law Division; 2) Deed of Sale; 3) Certified True Copy of the Transfer Certificate of Title (TCT); 4) Certification from the Social Housing Finance Corporation (SHFC) that the property was acquired through CMP; 5) Certified true copy of the Articles of Incorporation of the community association; 6) Certification issued by SHFC on the approval of the substitution; 7) Partial Release of Real Estate Mortgage; 8) Other pertinent documents. In reply, please be informed that by virtue of the substitution as duly approved by the SHFC, Peter B. Limas is deemed subrogated to the rights and obligations of Edwin Miraflor and is bound by exactly the same conditions, as those which bound the latter, thus the transfer in favor n Peter B. Limas of TCT No. N-285574 is not subject to either the capital gains tax imposed under Section 27 (D) (5) of the Tax Code of 1997, as amended, or the creditable withholding tax imposed under Revenue Regulations No. 2-98, as amended, implementing Section 57 (B) of the same Code, considering that the said transfer of property is without any consideration since it is merely a formality to finally effect the transfer of the said property to the member-beneficiary who actually bought the same from the former owner through the Association. In other words, the association is in fact transferring the ownership of the property to its member-beneficiary who actually owns the same. TAIaHE Furthermore, the said transfer is not subject to the donor's tax imposed under Section 99 of the Tax Code of 1997, since there is no donative intent or intention on your part to donate the said property to said member-beneficiary, considering that you could not donate property the ownership of which belongs to the donee (member-beneficiary) himself. (BIR Ruling No. 005-11 dated January 19, 2011 and BIR Ruling No. 367-11 dated October 5, 2011) It is noted that under Section 196 of the Tax Code of 1997, the deeds or documents subject to the documentary stamp tax imposed therein are those where the realty sold shall be granted, assigned, transferred, or otherwise conveyed to a purchaser or purchasers or to any other person or persons designated by such purchaser or purchasers, thereby excluding from its purview the instant case considering that the supposed purchaser is actually the owner thereof. Accordingly, the transfer of title of the said property to Peter B. Limas is not subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. However, the notarial acknowledgment to said deed of conveyance is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the Tax Code of 1997. (BIR Ruling No. 005-11 dated January 19, 2011 and BIR Ruling No. 367-11 dated October 5, 2011) It is, however, understood that the Certificate Authorizing Registration (CAR) shall only be issued after the submission of the requirements provided under RMO 15-2003 and after it is established upon proper verification by the Revenue District Officer (RDO) concerned that, considering the rules on valuation of real property, the actual selling price per sale transaction of the house and lot packages in this case does not really exceed P400,000.00 and P160,000.00 for lot only. Thus, sale of a house and lot or lot only above the maximum amount shall be subject to the corresponding internal revenue taxes. (BIR Ruling No. 005-11 dated January 19, 2011 and BIR Ruling No. 367-11 dated October 5, 2011) 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. CHATEa Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue n Note from the Publisher: Copied verbatim from the official copy.