BIR Ruling No. 423-15

December 17, 2015 BIR RULING NO. 423-15 RA No. 7279; BIR Ruling No. 053-15 San Miguel Urban Dwellers Homeowners Association, Inc . Sudlon, Brgy. Maguikay, Mandaue City Attention: Hilario S. Banate, Jr. President Gentlemen : This refers to the letter of Ma. Ana R. Oliveros, President of the Social Housing Finance Corporation (SHFC) dated July 27, 2015, endorsing the sale transaction between Mildred G. Molabola, et al. and San Miguel Urban Dwellers 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". cAaDHT Documents submitted disclose that Mildred G. Molabola, (married to Raul Molabola), Vicente R. Gochoco, Jr., Gina G. Pagdalian, (married to Stephen Pagdalian), Perlita R. Gochoco and Joel R. Gochoco (hereinafter referred to as Landowners) are the registered owners of a parcel of land, identified as Lot 569-B of the subdivision plan Psd-07-01-001792, being a portion of Lot 569, II-5121 Amd. 2, Hacienda Mandaue, L.R.C. Record No. 4030 covered by Transfer Certificate of Title (TCT) No. 111-2013000061 issued by the Registry of Deeds for Mandaue City. The aforesaid property is situated at Albao St., (interior) Maguikay, Mandaue City with an area of Three Thousand Six Hundred Fifty Three square meters (3,653 sq.m.), more or less. San Miguel Urban Dwellers Homeowners Association, Inc. (TIN 448-398-155-000), on the other hand, is a homeowner's organization duly registered with the Housing and Land Use Regulatory Board (HLURB). On June 25, 2014, the parties executed a Deed of Absolute Sale whereby the Landowners 1 transferred and conveyed the subject property to San Miguel Urban Dwellers Homeowners Association, Inc. at an agreed price of Nine Million One Hundred Thirty Two Thousand Five Hundred Pesos (P9,132,500.00). Pursuant to the certification issued by SHFC, the subject property covered by TCT No. 111-2013000061 actually comprises a Community Mortgage Program (CMP) Project and shall be proportionately distributed to the association's qualified member-beneficiaries. 2 For this purpose, San Miguel Urban Dwellers 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, San Miguel Urban Dwellers Homeowners Association, Inc. has completely submitted on July 31, 2015 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) SHFC Letter of Guaranty No. CMP-971; 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 TCT and Latest Tax Declaration of the Property Sold to the Community Association; 8) Certified true copy of the Location Plan of the Lot Sold to the Community Association; and HCaDIS 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 Mildred G. Molabola, for herself and as Attorney-in-Fact of Perlita R. Gochoco, Vicente R Gochoco, Jr., for himself and as Attorney-in-Fact of Joel R. Gochoco and Gina G. Pagdalian to San Miguel Urban Dwellers Homeowners Association, Inc. of the subject property covered by TCT No. 111-2013000061 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 Homeowner's 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. 053-15 dated February 27, 2015) AHCETa 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 consideration contracted to be paid for such realty or its fair market value determined in accordance with Section 6 (E) of the said Code, whichever is higher. 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 title 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. 053-15 dated February 27, 2015) 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 the Tax Code of 1997. 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 San Miguel Urban Dwellers Homeowners Association, Inc. Sudlon, Brgy. Maguikay, Mandaue City Name of Beneficiary Blk. Lot Total Area No. No. (sq.m.) 1 Fuentes, Norberto L. 1 1 43.49 2 Arnejo, Arlene M. 1 2 43.49 3 Tampos, Eugenio A. 1 3 43.49 4 Jayme, Lameresa A. 1 4 43.49 5 Saladaga, Emannuel C. 1 5 43.49 6 Basaes, Albert G. 1 6 43.49 7 Bulandres, Merlin B. I 7 43.49 8 Balasabas, Rene O. 1 8 43.49 9 Fuentes, Marcelino J. 1 9 43.49 10 Arnejo, Glen M. 1 10 43.49 11 Baclay, Ivy C. 1 11 43.49 12 Apurado, Joseph L. 1 12 43.49 13 Pancho, Jesus A. 1 13 43.49 14 Palang, Crispin S. 1 14 43.49 15 Sarlatan, Yvonne P. 1 15 43.49 16 Mata, Jenelin L. 2 6 43.49 17 Mata, Nomerito E. 2 7 43.49 18 Mata, Juaren L. 2 10 43.49 19 Gerasimio, Juvelyn L. 2 11 43.49 20 Gabisay, Adelaida M. 2 14 43.49 21 Basaes, Moisesa G. 2 15 43.49 22 Avenido, Ma. Bernadeth P. 2 18 43.49 23 Borbajo, Morfe T. 2 19 43.49 24 Berba, Sexto Jr. P. 2 22 43.49 25 Perocho, Catalina S. 2 23 43.49 26 Patiluna, Ma. Daisy S. 2 26 43.49 27 Mission, Lolita A. 2 27 43.49 28 Villarino, Roy C. 2 30 43.49 29 Pepito, Delma A. 2 31 43.49 30 Quilitar, Erwin M. 2 34 43.49 31 Belcia, Gerlie G. 2 2 43.49 32 Gamboa, Herminia G. 2 3 43.49 33 Plenos, Cheryl G. 2 4 43.49 34 Avenido, Fermin P. 2 5 43.49 35 Cejas, Roxanne M. 2 8 43.49 36 Dejito, Berdita P. 2 9 43.49 37 Sabado, Benky P. 2 12 43.49 38 Vasquez, Rogelio M. 2 13 43.49 39 Velasco, Jerome G. 2 16 43.49 40 Gaitan, Lemuel D. 2 17 43.49 41 Yosores, Norma C. 2 20 43.49 42 Cabatingan, Jhonna O. 2 21 43.49 43 Mangubat, Ben P. 2 24 43.49 44 Mangubat Jr., Bernardo G. 2 25 43.49 45 Albia, Nicanor B. 2 28 43.49 46 Balaon, Dolorosa C. 2 29 43.49 47 Barino, Patricia L. 2 32 43.49 48 Lumbab, Helen B. 2 33 43.49 49 Mercaral, Aline L. 2 35 43.49 50 Rivera, Clodualdo Jr. J. 3 1 43.49 51 Marababol, Allan C. 3 3 43.49 52 Dela Rama, Moises C. 3 5 43.49 53 Pilapil, Myrna M. 3 7 43.49 54 Bolonos, Evangeline P. 3 9 43.49 55 Cating, Amelita P. 3 11 43.49 56 Pliapil, Irene G. 3 13 43.49 57 Garbo, Corsini M. 3 15 43.49 58 Saladaga, Lennebeth C. 3 17 43.49 59 Tampus, Geraldine G. 3 19 43.49 60 Maputol, Esterlina I. 3 21 43.49 61 Pachico, Steve E. 3 23 43.49 62 Gutang, Marben C. 3 25 43.49 63 Bacunador, Jason P. 3 27 43.49 64 Pioquinto, Jervin N. 3 29 43.49 65 Cerdea, Ruben G. 3 31 43.49 66 Pancho, Maricris A. 3 33 43.49 67 Corasa, Richard F. 3 35 43.49 68 Suico, Arlene M. 3 2 43.49 69 Mata, Nicolas C. 3 4 43.49 70 Escol, Ritchie J. 3 6 43.49 71 Mata, Geraldine C. 3 8 43.49 72 Mata Jr., Renario H. 3 10 43.49 73 Wenceslao, Dorothea B. 3 12 43.49 74 Naraja, Analiza C. 3 14 43.49 75 Banate Jr., Hilario S. 3 16 43.49 76 Malinao, Rosalina B. 3 18 43.49 77 Maloloy-on, Jaime M. 3 20 43.49 78 Maloloy-on, Gabriel A. 3 22 43.49 79 Tabanas, Cerilo C. 3 24 43.49 80 Rallos, Lyra Lyn N. 3 26 43.49 81 Balasuela, Mervin D. 3 28 43.49 82 Toquero, Ana Luna G. 3 30 43.49 83 Lumapas, Lambert C. 3 32 43.49 84 Lumapas, Marcializa B. 3 34 43.49 Footnotes 1. Mildred G. Molabola, Attorney-in Fact of Perlita R. Gochoco and Vicente R. Gochoco. Attorney-in-Fact of Joel R. Gochoco. 2. See Annex for the masterlist of qualified beneficiaries.