BIR Ruling No. 422-15

December 17, 2015 BIR RULING NO. 422-15 Sec. 32, RA No. 7279; BIR Ruling No. 109-13; BIR Ruling No. 304-13 New San Lorenzo Ruiz Village Homeowners Association Inc. Brgy. Lawaan II, Talisay City Attention: Pablo Jose Berador, Jr. President Gentlemen : This refers to the letter of Ma. Ana R. Oliveros, President of the Social Housing Finance Corporation (SHFC) dated May 25, 2015, endorsing the sale transaction between The Municipality of Talisay, Cebu and New San Lorenzo Ruiz Village 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". SaCIDT Documents submitted disclose that The Municipality of Talisay, Cebu (hereinafter referred to as Landowner) is the registered owner of two (2) parcels of land covered by two (2) Transfer Certificates of Title (TCT): TCT No. Tax Declaration No. Lot No. Area (sq. m.) T-146390 06001100643 2236 3,040 T-146391 06001100626 2235 2,672 total area 5,712 both issued by the Registry of Deeds of Province of Cebu. The aforesaid properties are situated at Brgy. Lawaan II, Talisay City, New San Lorenzo Ruiz Village Homeowners Association Inc. (TIN 455-160-483-000), on the other hand, is a homeowner's organization duly registered with the Housing and Land Use Regulatory Board (HLURB). On December 15, 2011, the parties executed a Deed of Absolute Sale whereby the Landowner transferred and conveyed Three Thousand Six Hundred Ninety Eight and 32/100 square meters (3,698.32 sq.m.) portion of the subject properties to New San Lorenzo Ruiz Village Homeowners Association Inc. at an agreed price of One Million Four Hundred Seventy Nine Thousand Three Hundred Twenty Eight Pesos (P1,479,328,00). Pursuant to the certification issued by SHFC, 3,698.32 sq.m. out of 5,712 sq.m. covered by TCT Nos. T-146390 and T-146391 actually comprise a Community Mortgage Program (CMP) Project and shall be proportionately distributed to the association's qualified member-beneficiaries. 1 For this purpose, New San Lorenzo Ruiz Village 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. In support of its request, New San Lorenzo Ruiz Village Homeowners Association Inc. has completely submitted on May 29, 2015 the following documents: 1) SHFC letter application for tax exemption; 2) Certification of the President of the SHFC that 3,698.32 sq.m. portion of the subject properties qualify and is actually a CMP project; 3) SHFC Letter-Guaranty No. LCMP-04; 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 TCTs and Latest Tax Declarations of the Property Sold to the Community Association; 8) Certified true copy of the Location Plan of the Lot Sold to the Community Association; cHECAS 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" the landowner who sold its properties under CMP for use in a socialized housing project are exempt from the payment of capital gains tax. Such being the case, the sale by the landowner, The Municipality of Talisay, Cebu to New San Lorenzo Ruiz Village Homeowners Association Inc. of the 3,698.32 sq.m. out of 5,712 sq.m. covered by TCT Nos. T-146390 and T-146391 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 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. 32 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 actual consideration, since one of the contracting parties is the Government. 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 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 RMO15-2003. (BIR Ruling No. 109-13 dated March 21, 2013) AHDacC Moreover, under Section 109 (1) (P) of the Tax Code of 1997, as amended by R.A. 9337, the sale of real properties utilized for low-cost and socialized housing as defined by R.A. No. 7279 shall be exempt from value-added tax (VAT), thus, the sale of the 3,698.32 sq.m. out of 5,712 sq.m. covered by TCT Nos. T-146390 and T-146391 by the landowner to New San Lorenzo Ruiz Village Homeowners Association Inc. is exempt from the imposition of VAT. (BIR Ruling No. 304-2013 dated August 6, 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. 27 (D) (5) 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 of Internal Revenue ANNEX New San Lorenzo Ruiz Village Homeowners Association Inc . Brgy. Lawaan II, Talisay City Name of Beneficiary Blk. Lot Total Area No. No. (sq.m.) 1 FERNANDEZ, Thelma 1 1 75.09 2 MAHILUM, Serafin C. 1 2 72.41 3 MAHINAY, June B. 1 3 72.41 4 ZAMORA, Santiago O. 1 4 72.41 5 BARRIENTOS, JACOBO L. 1 6 72.41 6 LOR, Maximo S. 1 7 91.18 7 FERRER, Gergenia E. 2 1 67.05 8 BASLOT, Simeon O. 2 2 72.41 9 AROA, Gretel L. 2 3 72.41 10 ENTIENZA, Juanna A. 2 4 72.41 11 OLIVEROS, Antonio D. 2 9 104.59 12 MONACILLO, Glecirio R. 3 5 72.41 13 SALVADOR, Antonio O. 3 7 72.41 14 COJO, Romeo B. 3 8 72.41 15 ROMARES, Jimmy M. 3 9 72.41 16 TANGHAL, Emelyn G. 3 10 72.41 17 COLANGO, Jonathan C. 3 12 72.41 18 CABALAN, Judelyn C. 3 13 77.77 19 BERADOR, Pablo Jose Jr. G. 4 1 57.66 20 MANAIT, Maryfe A. 4 2 72.41 21 ROMARES, Roy M. 4 3 72.41 22 SINGSON, Ciriaco G. 4 4 72.41 23 SABANAL, Dioscorro L. 4 5 72.41 24 ABELLANA, Melogen Dorothy B. 5 1 63.02 25 BACOMO, Santos A. 5 3 72.41 26 SAUSAL, Stephany C. 5 4 72.41 27 CONSAD, Renato N. 5 5 72.41 28 MONTEFALCON, Carlita R. 5 6 72.41 29 LAAS, Henry B. 5 7 72.41 30 ALCANTARA, Bienvenido L. 5 8 72.41 31 ESPINA, Lucia D. 5 10 72.41 32 BAUTISTA, Roman S. 5 11 85.82 33 REPONTE, Generoso E. 5 12 88.50 34 SANCHEZ, Roy H. 6 4 72.41 35 SANTILLAN, Delilah C. 6 6 72.41 36 PATAY, Penny Lyn Holly F. 6 8 72.41 37 JABELLANA, Gamaliel D. 6 9 72.41 38 TANZA, Lolito B. 6 11 45.59 39 CULANAG, Eligio L. 6 12 46.93 40 TECSON, Jose Roseller A. 6 14 46.93 41 ABELLANA, Randy Boy N. 7 1 44.25 42 ATILLO, Patricio Jr. E. 7 2 44.25 43 YURAG, Nelson O. 7 3 85.82 44 BONGATO, Felipe A. 7 4 41.57 45 DUGMOC, Randy J. 7 5 54.98 46 SUNGKIP, Nilo N. 7 6 83.14 47 SEFUESCA, Roldan C. 7 7 42.91 48 DANATIL, Simplicio R. 7 8 42.91 49 BASE, Juanita C. 7 10 42.91 50 CAPA, Reynaldo J. 8 2 95.21 51 CAMURO, Rosalie T. 8 3 45.59 52 BACASMAS, Samuel N. 8 4 46.93 53 PEREN, Semeon G. 8 5 68.39 54 LERADO, Gloria C. 8 6 41.57 55 BATAN, Rolando S. 7 40.23 Footnotes 1. see Annex for the masterlist of qualified beneficiaries.