BIR Ruling No. 417-14

October 23, 2014 BIR RULING NO. 417-14 RA No. 7279; BIR Ruling No. 109-13 Pundok Panaghiusa Sa A. Lopez Homeowners Association, Inc. A. Lopez St., Cebu City Attention: Carmelita A. Tabuelog President Gentlemen : This refers to the letter of Ma. Ana R. Oliveros, President of the Social Housing Finance Corporation (SHFC) dated July 9, 2014, endorsing the sale transaction between Teresita L. Carrasco and Norberto L. Carrasco and Pundok Panaghiusa Sa A. Lopez 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 Teresita L. Carrasco and Norberto L. Carrasco (hereinafter referred to as Landowners) are the respective registered owners of two (2) parcels of land covered by two (2) Transfer Certificates of Title (TCT): Landowner TCT No. Lot No. Tax Declaration No. Area (Sq. M.) Norberto L. 131494 7043-C-5 GRC6-10-070- 130 Carrasco 06645 Teresita L. 131493 7043-C-4 GRC6-10-070- 130 Carrasco 06640 Total Area 260 ==== both issued by the Registry of Deeds for the Cebu City. The aforesaid properties are situated at A. Lopez St., Labangon, Cebu City. Pundok Panaghiusa Sa A. Lopez Homeowners Association, Inc. (TIN 435-646-837-000), on the other hand, is a homeowner's organization duly registered with the Housing and Land Use Regulatory Board (HLURB). On June 9, 2014, the parties executed a Deed of Absolute Sale whereby the Landowner transferred and conveyed the subject properties to Pundok Panaghiusa Sa A. Lopez Homeowners Association, Inc. at an agreed price of Eight Hundred Thousand Pesos (P800,000.00). Pursuant to the certification issued by SHFC, the subject properties covered by TCT Nos. 131494 and 131493 actually comprise a Community Mortgage Program (CMP) Project and shall be proportionately distributed to the association's qualified member-beneficiaries. 1 For this purpose, Pundok Panaghiusa Sa A. Lopez 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 July 4, 2014. DSETcC In support of its request, Pundok Panaghiusa Sa A. Lopez Homeowners Association, Inc. has completely submitted on July 11, 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 Deed of Absolute Sale to the Community Association; 4) Certified true copy of the Articles of Incorporation of the Community Association; 5) Certified true copy of the Masterlist of Qualified Beneficiaries duly certified by the SHFC; 6) Certified true copies of the TCTs and Latest Tax Declarations of the Property Sold to the Community Association; 7) Certified true copy of the Location Plan of the Lot Sold to the Community Association; 8) TIN ID/BIR Certificate of Registration of the seller and the Homeowner Association; and 9) 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" 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 Pundok Panaghiusa Sa A. Lopez Homeowners Association, Inc. of the subject properties covered by TCT Nos. 131494 and 131493 is exempt from the capital gains tax. AcDaEH 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 realties or their fair market values 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. (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 sellers are entitled to exemption from capital gains tax or income tax imposed under Sec. 24 (D) (1) the Tax Code of 1997, as amended. 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 Pundok Panaghiusa Sa A. Lopez Homeowners Association, Inc. A. Lopez St., Cebu City Name of Beneficiary Blk. No. Lot No. Total Area (Sq.M.) 1 Cubelo, Helen M. 1 1 21.67 2 Cubelo, Mark Anthony M. 1 2 21.67 3 Arnaiz, Elesio V. 1 3 21.67 4 Arnaiz, Mercedita S. 1 4 21.67 5 Alcala, Hayne A. 1 5 21.67 6 Manzanades, Eusebio M. 1 6 21.67 7 Flores, Bebian M. 1 7 21.67 8 Tabuelog, Carmelita A. 1 8 21.67 9 Vibar, Ronnie A. 1 9 21.67 10 Vibar, Ramil A. 1 10 21.67 11 Sabiona, Marilou A. 1 11 21.67 12 Albios, Heginia A. 1 12 21.67 Footnotes 1. See Annex for the masterlist of qualified beneficiaries.