BIR Ruling No. 418-13

November 13, 2013 BIR RULING NO. 418-13 RA 7279; BIR Ruling No. 066-2011; BIR Ruling No. 413-2011 Mayor Manuel T. Sagarbarria City of Dumaguete Sir : This refers to the consolidated request of the National Housing Authority (NHA)-Region VII and the City of Dumaguete dated November 19, 2012 and January 29, 2013 requesting tax exemption from the payment of Capital Gains Tax and other taxes on the Deed of Sale executed between Josefina O. Baraclan and Soledad Pacana Tale, et al., and NHA in accordance with the Republic Act No. 7279, otherwise known as the Urban Development and Housing Act of 1992. Documents submitted show that Josefa Tale and Jesus Tale, (married to Soledad Pacana),are the registered co-owners of parcels of land covered by two (2) Transfer Certificates of Title (TCT),to wit: TCT No. Area (sq.m.) Tax Declaration No. 3072 28,762 93-012-4168 13102 8,430 93-012-3683 issued by the Registry of Deeds for the City of Dumaguete. The aforesaid properties are situated at Brgy. Banilad, Dumaguete City. On September 7, 1993, by virtue of "Extrajudicial Settlement", 1 the one-half (1/2) undivided share of Josefa Tale in the above described properties was adjudicated unto and in favor of Josefina O. Baraclan as her paraphernal property. CcAIDa Likewise, on February 20, 1997, by virtue of "Waivers'', 2 Jose Tale waived his one-half (1/2) undivided share in TCT No. 13102 in favor of Josefina O. Baraclan and Josefina O. Baraclan waived her one-half (1/2) undivided share in TCT No. 3072 in favor of Jesus Tale. On June 6, 2012, a Memorandum of Agreement (MOA) was executed by and among, The City Government of Dumaguete (CITY),Housing and Urban Development Coordinating Council (HUDCC),NHA, Department of Social Welfare and Development (DSWD),Department of Public Works and Highways (DPWH) and Department of Environment and Natural Resources (DENR) for the acquisition and development of some 7.80 hectares, more or less, of properties located at Brgy. Banilad, Dumaguete City, Negros Oriental which shall be known as Banilad Plains View (Project) to include land development, housing construction, survey works and lot titling and the provision of community facilities. The project will generate a total of 1,000 serviced lots, more or less, for housing assistance benefit some 1,000 families rendered homeless by Typhoon Sendong and those situated within the 20-meter easement of riverbanks and danger areas. NHA shall provide funds for the acquisition of 7.80 hectares, more or less, of land located at Brgy. Banilad, Dumaguete City, Negros Oriental for the development into a resettlement project, at an approved cost of P600.00 per square meter; DPWH shall provide funds for the land development of the site to include site preparation, earthworks, roadworks, drainage works and construction of roadworks; NHA and DSWD shall jointly provide funds for the construction of housing units for the project, NHA shall provide the amount of Forty Thousand pesos (P40,000.00) per unit while DSWD shall provide the amount of Seventy Thousand pesos (P70,000.00) balance per unit to complete the necessary One Hundred Ten Thousand pesos (P110,000.00) housing construction cost; the City shall provide funds to cover the costs for the installation of water and power facilities, the provision of community facilities (school, public market, etc.) and any amount in excess of the P110 Million to be provided by NHA and DSWD for the construction of housing units. cCTESa On June 25, 2012, a Memorandum of Understanding (MOU) was executed by and among, the City, NHA and Josefina O. Baraclan and Soledad Pacana Tale 3 (Landowners),whereas the landowners agree to sell, transfer and convey to the NHA the buildable area of Lot Nos. 5581 and 5582 covered by TCT Nos. 13102 and 3072, respectively, with an aggregate area of 37,192 square meters (sq.m.) at a cost of Six Hundred pesos (P600.00) per sq.m. Consequently, on September 25, 2012, a Deeds of Absolute Sale of Real Property was executed by and between Soledad Pacana Tale, Ernesto P. Tale, Rebecca T. Bautista, Florita T. Ornopia and Catherine T. Tan (Legal Heirs of Jesus Tale);Josefina O. Baraclan and the NHA whereby the landowners transferred and conveyed Twenty Five Thousand One Hundred Thirty square meters (25,130 sq.m.) portion of Lot 5582 covered by TCT No. 3072 and Eight Thousand Four Hundred Thirty square meters (8,430 sq.m.) of Lot 5581 covered by TCT No. 13102 at Six Hundred pesos (P600.00) per sq.m. Lastly, Certificates Authorizing Registration (CAR) were issued to the Estates of Josefa Tale and Jesus Tale dated December 11, 1998 and November 21, 2012, respectively, certifying that the estates of Josefa Tale and Jesus Tale have fully paid the estate tax. In reply, please be informed that pursuant to Sections 19 and 20 of Republic Act (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. cSCTEH "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: xxx xxx xxx 2) Capital gains tax on raw lands use for the project; IDaEHC xxx xxx xxx" the owner of the raw land is exempt from the payment of capital gains tax or the withholding tax under Revenue Regulations No. 2-98, as amended, on the conveyance of the parcel of land for use in the aforesaid socialized housing project. Such being the case, the sale of the Twenty Five Thousand One Hundred Thirty square meters (25,130 sq.m.) portion of Lot 5582 covered by TCT No. 3072 and Eight Thousand Four Hundred Thirty square meters (8,430 sq.m.) of Lot 5581 covered by TCT No. 13102 to NHA is exempt from capital gains tax. (BIR Ruling No. 066-2011 dated March 9, 2011) 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. HETDAa 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 the landowners to NHA of the Twenty Five Thousand One Hundred Thirty square meters (25,130 sq.m.) portion of Lot 5582 covered by TCT No. 3072 and Eight Thousand Four Hundred Thirty square meters (8,430 sq.m.) of Lot 5581 covered by TCT No. 13102 is concerned, is likewise exempt from documentary stamp tax imposed under Section 196 of the Tax Code of 1997, as amended. (BIR Ruling No. 413-2011 dated October 28, 2011) Upon application for exemption, a lien on the titles of the lands shall be annotated by the Register of Deeds having jurisdiction over the properties, to the effect that the same are to be applied or are being applied to socialized housing project pursuant to RA 7279. Please take note 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 lands 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) after the submission of the requirement provided under RMO 15-2003. 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. cHECAS Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue Footnotes 1. Duly notarized by Atty. Rodrigo V. Icao, identified as Doc. No. 292; Page No. 56; Book No. II Series of 1993. 2. Duly notarized by Atty. Epifanio J. Sedigo, identified as Docs. No. 20 and 21; Page No. 75; Book II; Series of 1997. 3. As Attorney-in-Fact, by virtue of a Special Power of Attorney (SPA) dated July 19, 2012 to represent the Heirs of Jesus Tale to sign the MOU, Conditional Contract to sell/Deed of Absolute Sale and other legal documents as maybe necessary.