BIR Ruling No. 424-15

December 17, 2015 BIR RULING NO. 424-15 RA No. 7279; BIR Ruling No. 053-15 Seora Lolita Village Homeowners Association, Inc. Brgy. Espinosa, Masbate City Attention: Louie V. Danao President Gentlemen : This refers to the letter of Ma. Ana R. Oliveros, President of Social Housing Finance Corporation (SHFC) dated August 11, 2015, endorsing the sale transaction between Osmea Colleges, Inc. and Seora Lolita 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". ScHADI Documents submitted disclose that Osmea Colleges, Inc. (TIN 000-561-025-000) (hereinafter referred to as Landowner) is the registered owner of a parcel of land, identified as Lot 2 of the consolidation-subdivision survey Pcs-05-001666, being a portion Lots 3 & 4, Pcs-05000772 covered by Transfer Certificate of Title (TCT) No. T-13308 issued by the Registry of Deeds for the Province of Masbate. The aforesaid property is situated at Brgy. Espinosa, Masbate City with an area of Twenty Three Thousand Eight Hundred Seventy Nine square meters (23,879 sq.m.), more or less. Seora Lolita Village Homeowners Association, Inc. (TIN: 429-951-028-000), on the other hand, is a homeowner's organization registered with the Housing and Land Use Regulatory Board (HLURB). On March 26, 2015, the parties executed a Deed of Absolute Sale whereby the Landowner transferred and conveyed Six Thousand Five Hundred Fifty square meters (6,550 sq.m.) portion of the subject property to Seora Lolita Village Homeowners Association, Inc. at an agreed price of Nine Million Eight Hundred Twenty Five Thousand Pesos (P9,825,000.00) under Community Mortgage Program (CMP) of the SHFC. Pursuant to the certification issued by SHFC, 6,550 sq.m. out of 23,879 sq.m. covered by TCT No. T-13308 actually comprise a CMP Project and shall be proportionately distributed to the association's qualified member-beneficiaries. 1 For this purpose, Seora Lolita 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, Seora Lolita Village Homeowners Association, Inc. has completely submitted on August 14, 2015 the following documents: 1) SHFC letter application for tax exemption; 2) Certification of the President of the SHFC that 6,550 sq.m. portion of the subject properties qualifies and is actually a CMP project; 3) Certified true copy of the Letter-Guaranty No. 1074; 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 Properties Sold to the Community Association; 8) Certified true copy of the Location Plan of the Lot Sold to the Community Association; aICcHA 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 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 landowner to Seora Lolita Village Homeowners Association, Inc. of the 6,550 sq.m. portion out of 23,879 sq.m. covered by TCT No. T-13308 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 Certificates 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 properties, to the effect that the said properties shall be used for socialized housing pursuant to RA No. 7279. (BIR Ruling No. 053-15 dated February 27, 2015) 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 landowner is liable to pay the documentary stamp tax on the documents conveying the afore-stated properties 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. (BIR Ruling No. 053-15 dated February 27, 2015) 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 6,550 sq.m. portion out of 23,879 sq.m. covered by TCT No. T-13308 by the landowner to Seora Lolita Village Homeowners Association, Inc. is exempt from the imposition of VAT. (BIR Ruling No. 053-15 dated February 27, 2015) 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 issue after the submission of the requirements provided under RMO 15-2003. (BIR Ruling No. 053-15 dated February 27, 2015) EHaASD 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 seller is 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 Seora Lolita Village Homeowners Association, Inc. Brgy. Espinosa, Masbate City Name of Beneficiary Blk. Lot Total Area No. No. (sq.m.) 1 Palis, Guillermo Pasatiempo 22 2 57.37 2 Mapa, Rose Ann P. 22 3 57.37 3 Danao, Louie V. 22 4 74.11 4 Flores, Nefretiti E. 22 5 49.60 5 Lopez, Aphrodite E. 22 6 47.81 6 Centino, Lanie C. 22 7 59.76 7 Verano, Julius M. 22 8 59.76 8 Santianez, Razel Cabug 22 9 70.52 9 Cabug, Kent Salvador Castro 22 10 74.11 10 Cabug, Ma. Hearty Hyacenth Castro 22 11 74.11 11 Cabug, Jose Jeffrey Berbasa 22 12 74.11 12 Danao, Mary Ann Cabug 22 13 74.11 13 Espares, Glaiza Pearl Cabug 22 14 74.11 14 Berbasa, Kathlyn Otom 22 15 71.72 15 Lovedorial, Sheryl Tugbo 22 16 35.86 16 Lovedorial, Vina Tugbo 22 17 35.86 17 Lovedorial, Ellen Tugbo 22 18 35.86 18 Lovedorial, Princess Tugbo 22 19 37.05 19 Paraiso, Marilou D. 22 20 83.67 20 Reyes, Rosalina Cabug 23 1 57.37 21 Gutierrez, Catherine Corral 23 2 39.44 22 Corral, Ruther Fernando Almoguera 23 3 39.44 23 Corral, Michael A. 23 4 39.44 24 Silva, Teresa Patricio 23 5 51.40 25 Patricio, Benjamin Jr. Cabug 23 6 47.81 26 Patricio, Renante Sr. Cabug 23 7 25.10 27 Patricio, Gladyz Mae Cabug 23 8 60.96 28 Pamanian, Luis Amante 23 9 33.47 29 Sanchez, Lora P. 23 10 28.69 30 Pamanian, Lino Amante 23 11 34.66 31 Pamanian, Larry Amante 23 12 35.86 32 Pamanian, Lirio A. 23 13 35.86 33 Retulla, Lizbeth P. 23 14 37.05 34 Eser, Zsa Zsa B. 23 15 56.18 35 Evangelista, Lucivar Jr. P. 23 16 31.08 36 Evangelista, Perly P. 23 17 31.08 37 Verano, Joanne M. 24 2 47.81 38 Verano, Edna Celebre 24 3 46.61 39 Rivera, Allan A. 24 5 62.15 40 Bajar, Edward DT 24 6 74.11 41 Laurio, Nenita Montella 24 7 52.59 42 Layson, Jesus Vergel Montella 24 8 32.27 43 Layson, Joana Montella 24 9 31.08 44 Villar, Jesan Mogueis 24 10 10.76 45 Anonuevo, Hever Omebao 25 3 17.93 46 Verano, Victoria Laurio 25 4 31.67 47 Judal, Allan Arelio 26 1 23.91 48 Salvo, Leslie Samson 26 4 45.42 49 Corral, Roman Ditcicoso 26 5 63.35 50 Grona, Ruben III Gigante 26 6 16.14 51 Francisco, Noli Deinla 26 7 44.22 52 Bajar, Margarita M. 26 8 15.54 53 Medina, Arturo Ibanez 26 9 56.18 54 Amante, Augusto A. 26 10 52.59 55 Abriol, Lorie Jean P. 26 11 20.92 56 Guanzon, Mary Jean A. 26 12 21.51 57 Amante, Michael Augustos C. 26 13 14.34 58 Danao, Pearline M. 26 14 28.69 59 Natural, Nemfa S. 26 16 44.22 60 Pastrana, Gemma Dela Rosa 26 17 49.01 61 Bajar, Manuel Sr. M. 26 18 49.01 62 Marabe, Edgardo Matta 26 19 71.72 63 Marabe, Gretchen Manuel 26 20 70.52 64 Marabe, Gener M. 26 21 70.52 65 Avenir, Corazon Sambajon 26 22 40.64 66 De Jesus, Basilisa Boyo 26 23 43.03 67 Choy, Lyn M. 27 1 68.73 68 Pamanian, Renaldo G. 27 2 42.43 69 Abriol, Ricardo Sr. Evangelista 27 3 33.47 70 Abriol, Paz Evangelista 27 4 66.93 71 Capellan, Rafael Sr. Montilla 27 5 52.59 72 Deladia Michelle B. 27 6 74.11 73 Terbio, Katrylle Anne Meteoro 27 8 112.35 74 Santiago, Mark Joel F. 28 3 49.01 75 Arguelles, Cyndi Santiago 28 4 50.20 76 Arguelles, Lomel A. 28 5 43.03 77 Almoradie, Mariso A. 28 6 41.83 78 Almeni, Lucita A. 28 8 53.79 79 Marabe, Jay Ann V. 28 9 39.44 80 Distura, Josel A. 28 10 39.44 81 Marabe, Elmar V. 28 11 39.44 82 Marabe, Guenther V 28 12 39.44 83 Betonio, Ross Ann C. 28 13 33.47 84 Betonio, Rhovelle C. 28 14 33.47 85 Villasis, Marbeth A. 28 15 35.86 86 Abriol, Susan E. 29 1 68.13 87 Eser, Rex L. 29 2 33.47 88 Eser, Jack L. 29 3 32.27 89 Gohilde, Sharon A. 30 3 56.18 90 Arevalo, Analiza R. 31 1 15.54 91 Sultan, Michael R. 31 2 21.51 92 Returan, Ronaldo Dalida 31 3 53.79 93 Hungo, Reynaldo Cantoba 31 5 25.10 94 Soler, Zenaida G. 31 6 74.11 95 Dela Cruz, Eugelina Verano 31 7 47.81 96 Reyes, Jorge S. 31 8 60.96 97 Renon, Lilibeth Roxas 31 16 33.47 98 Lebres, Maria F. 32 1 66.93 99 Loresca, Manuela Fontelar 32 2 63.35 100 Gonzales, Aurea Jacobo 32 3 62.15 101 Montes, Rebecca L. 32 5 62.15 102 Capicenio, Silvano D. 32 6 101.60 103 Dalanon, Jasmina C. 32 9 33.47 104 Catanduanes, Michael F. 32 10 33.47 105 Catanduanes, Ma. Teresita K. 32 11 33.47 106 Arellano, Orlando J. 33 1 32.27 107 Banares, Rufino B. 33 2 64.54 108 Espinosa, Fernando Jr. Nazareno 33 3 43.03 109 Espinosa, Gregorio III Nazareno 33 4 40.64 110 Espinosa, Emmanuel Nazareno 33 5 40.64 111 Manlapaz, Nilo Jr. Andres 34 1 39.44 112 Manlapaz, Andrew Andres 34 2 40.64 113 Dalumpines, Eppie III Ferrer 34 4 37.05 114 Dalumpines, Carlito Ferrer 34 5 37.05 115 Bajar, Jona Dalumpines 34 6 35.86 116 Navea, Jane D. 34 7 35.86 117 Laurio, Precious Lyka Dalumpines 34 8 35.86 118 Sampaga, Sisa D. 34 9 52.59 119 Sampaga, Richelle Danao 34 10 52.59 120 Laurio, Janeth Dalumpines 34 11 71.72 121 Mendones, Maricel L. 34 12 92.03 122 Piodos, Adrian M. 34 13 43.03 123 Panghunasan, Shiela C. 34 17 44.22 124 Llamera, Dinnes L. 34 19 41.83 125 Dumangas, Henry A. 35 3 44.22 126 Tambule, Joseph Bajar 35 4 44.22 127 Tambule, Josephine Bajar 35 5 44.22 128 Pasion, Shirly Magdaraog 35 6 45.42 129 Alcao, John Neri 35 8 27.49 130 Alcao, Luis Wong 35 9 50.20 131 Pagba, Alain Amante 35 10 47.81 132 Pagba, Rubina Amante 35 11 47.81 133 Amante, Alejandro A. 35 12 76.50 134 Lucero, Jennifer D. 36 9 26.30 135 Manlapaz, Salvacion P. 36 10 40.64 136 Laurio, Ma. Liza A. 36 11 83.67 137 Laurio, Jelita A. 36 12 82.47 Footnotes 1. See Annex for the masterlist of qualified beneficiaries.