BIR Ruling No. 416-13

November 13, 2013 BIR RULING NO. 416-13 RA 7279; RR 11-97;BIR Ruling No. 353-2013 TRM Construction & Development Corporation Unit 2707 Union Bank Plaza Corner Onyx Street, Meralco Avenue Ortigas Center, Pasig City Attention: Josephine M. Lagman President Gentlemen : This refers to the letter of Atty. Chito M. Cruz, General Manager of National Housing Authority dated September 3, 2012, received by this Office on March 14, 2013, requesting issuance of Certificate of Tax Exemption for the AFP-PNP Housing Program in Barangay San Benito Norte, Aringay, La Union pursuant to Republic Act (R.A.) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". Documents submitted show that on September 18, 2012, a Contract Agreement as amended on June 6, 2013, was executed by and between TRM Construction & Development Corporation (TIN 208-380-838-000) and AFP Housing Homeowners Association, Inc. and PNP Housing Homeowners Association, Inc., a homeowner's organizations registered with the Housing and Land Use Regulatory Board (HLURB), whereby TRM Construction & Development Corporation has agreed to sell to AFP Housing Homeowners Association, Inc. and PNP Housing Homeowners Association, Inc.'s individual members the developed lots and completed housing units covered by the said Titles under the Community Initiative Approach Program (CIAP) of the National Housing Authority (NHA) for Two Hundred Forty Thousand Pesos (P240,000.00) for every developed lot and completed housing unit per family. cAaETS Moreover, on September 18, 2012, a Memorandum of Agreement (MOA) for developed lots and completed housing units, was executed by and among TRM Construction & Development Corporation as the landowner/developer, AFP Housing Homeowners Association, Inc. and PNP Housing Homeowners Association, Inc., as the beneficiaries, and the NHA, as the implementing government agency for the AFP/PNP Housing Program as cited under Administrative Order No. 9 dated April 11, 2011. Under the MOA, members of the AFP Housing Homeowners Association, Inc. and PNP Housing Homeowners Association, Inc., shall be provided by the NHA with a financial grant for the acquisition house and lot packages in the AFP/PNP Housing Project through the CIAP in the amount of Php240,000.00 for a House and Lot Package of Forty square meters (40.00 sq.m.) lot and Twenty Two square meters (22.00 sq.m.) floor area. It is noted that TRM Construction & Development Corporation is the absolute and registered owner of parcels of land located at Barangay San Benito Norte, Aringay, La Union, covered by Transfer Certificates of Titles (TCT), to wit: TCT No. Area (sq.m.) Tax Declaration No. 025-2013000170 1 20,001 02247 025-2013000169 2 40,000 02246 60,001 ===== and that on February 14, 2013, a Deed of Conveyance executed by and between TRM Construction & Development Corporation and NHA, whereby TRM Construction & Development Corporation agreed to sell to NHA of house and lot packages with aggregate area of Thirty Six Thousand Eight Hundred Ninety Six square meters (36,896 sq.m.) for One Hundred Three Million Six Hundred Fifteen Thousand pesos (P103,615,000.00) to give effect to the Contract Agreement and MOA. CaASIc In support of your above request, you submitted the following documents: 1) Certified Machine Copy of TRM Construction & Development Corporation's Securities and Exchange Commission (SEC) Certificate of Registration, Articles of Incorporation and By-Laws; 2) BIR Certificate of Registration; 3) Copies of HLURB Certificates of Registration of AFP Housing Homeowners Association Incorporation and the PNP Housing Homeowners Association Incorporation; 4) Notarized copy of Deed of Conveyance dated February 14, 2013 between TRM Construction & Development Corporation and the National Housing Authority; 5) Certified True Copy of the Memorandum of Agreement by and among TRM Construction & Development Corporation, AFP Housing Homeowners Association Incorporation and the PNP Housing Homeowners Association Incorporation and National Housing Authority; 6) Certified True Copies Contract of Agreement and Amendment to the Contract Agreement between TRM Construction & Development Corporation and AFP Housing Homeowners Association Incorporation and the PNP Housing Homeowners Association Incorporation; 7) Certified true copies of the Transfer Certificate of Titles and Tax Declarations; AECacS 8) Other pertinent documents. In reply, please be informed that pursuant to Sections 19 and 20 RA No. 7279, pertinent portions of which state that: "Sec. 19. Incentives for the National Housing Authority . The National Housing Authority, being the primary government agency in charge of providing housing for the underprivileged and homeless, shall be exempted from the payment of all fees and charges of any kind, whether local or national, such as income and realty taxes. All documents or contracts executed by and in favor of the National Housing Authority shall also be exempt from the payment of documentary stamp tax and registration fees, including fees required for the issuance of transfer certificates of title. "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: (1) Project-related income taxes; (2) Capital gains tax on raw lands used for the project; (3) Value-added tax for the project contractor concerned. EHaDIC xxx xxx xxx" the landowner/developer of properties who sell its properties for use in a socialized housing project are exempt from the payment of the Capital gains tax and project-related income taxes. Such being the case, the sale of TRM Construction & Development Corporation to NHA of the house and lot packages on the Thirty Six Thousand Eight Hundred Ninety Six square meters (36,896 sq.m.) portion of the subject properties is concerned is exempt from the capital gains tax, project-related income taxes and consequently from withholding tax. Upon issuance of this letter of exemption, and upon registration of the documents of sale, a lien on the Certificates of Title of the land to be issued in the name of the NHA shall be caused to 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 R.A. No. 7279. (BIR Ruling No. 353-2013 dated September 20, 2013) Moreover, pertinent portions of RMC No. 42-01 dated October 5, 2001, provide, viz. : xxx xxx xxx A. National Housing Authority (NHA) The NHA, being the primary government agency in charge of providing housing for the underprivileged and homeless citizens shall be exempted from the payment of the following national internal revenue taxes: (1) . . . (2) Documentary stamp tax on sales transactions executed by and in favor of the NHA in connection with socialized housing projects. Since Section 19 of R.A. 7279 exempts "all documents or contracts executed by and in favor of the NHA," the exemption from documentary stamp tax extends to the other party (either seller or buyer) that is dealing or transacting with the NHA. EDISaA xxx xxx xxx The exemption from documentary stamp tax of NHA in connection with any of its socialized housing project extends to the other party (either seller or buyer) that deals or transacts with the NHA. Consequently, since NHA is a party to the sale, no documentary stamp tax shall be due on such sale, either on NHA or the party with which NHA is transacting. Accordingly, the transfer by NHA of its real properties in favor of member-beneficiaries is, likewise, exempt from the payment of documentary stamp tax under Section 196 of the Tax Code of 1997, as amended. (BIR Ruling No. 353-2013 dated September 20, 2013) Pursuant to Section 20 of RA 7279, a project contractor of a socialized housing project shall also be exempt from the payment of value-added tax (VAT) on the project concerned. However, its purchases of goods/articles shall be subject to VAT, even if the said purchases are to be used for the socialized housing project, since VAT is an indirect tax which can be passed on by the seller of the goods/services. Moreover, it shall be understood that TRM Construction & Development Corporation must issue non-VAT official receipts on its gross receipts from the said socialized housing project. (BIR Ruling No. 353-2013 dated September 20, 2013) 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 of Internal Revenue Footnotes 1. Formerly TCT No. 025-RT2013000122 (T-34153) reconstituted title of TCT No. T-34153. 2. Formerly TCT No. 025-RT2013000123 (T-34154) reconstituted title of TCT No. T-34154.