BIR Ruling No. 425-13

November 14, 2013 BIR RULING NO. 425-13 RA 7279; BIR Ruling No. 005-11; BIR Ruling No. 367-11 Hollow Blocks Neighborhood Association, Inc. Purok Hollowblocks, Brgy. Singcang-Airport Bacolod City Attention: Emma H. Tacsagon President Gentlemen : This refers to your letter dated June 16, 2011, duly indorsed by Revenue Region No. 12-Bacolod City requesting exemption from the payment of Capital Gains Tax and other taxes, relative to the transfer of title of land from Hollow Blocks Neighborhood Association, Inc. in favor of Mr. Remegio D. Serrano pursuant to Republic Act 7279 otherwise known as the "Urban Development and Housing Act of 1992". It is represented that Hollow Blocks Neighborhood Association, Inc. with Taxpayer's Identification No. 004-247-904-000, is the registered owner of the parcel of land identified as Lot 5, Pcs-06-002533, being a cons. of Lots 3 & 4, Pcs-06-001453 containing an area of eighty square meters (80.00 sq.m.) covered by Transfer Certificate of Title (TCT) No. 207579 issued by the Registry of Deeds for the Bacolod City, located at Brgy. Singcang-Airport, Bacolod City; that it is a non-stock, non-profit organization duly registered with the Housing and Land Use Regulatory Board (HLURB);that the aforesaid lot was acquired through a loan under the Community Mortgage Program (CMP) of the Social Housing Finance Corporation (SHFC);that said project was taken-out/paid on June 16, 1994 in the amount of Php556,380.31 involving twenty one (21) beneficiaries; that Mr. Remegio D. Serrano is one of the beneficiaries therein; that the SHFC issued a Partial Release of Real Estate Mortgage constituted described in Transfer Certificate of Title (TCT) No. 207579 dated December 6, 2010; and that Mr. Remegio D. Serrano is now in the process of transferring the purchased property to his name. SDEHIa In support of your request, you have completely submitted on September 10, 2012 the following documents: 1) Written Application for Exemption filed with the Law Division; 2) Original Copy of the Deed of Sale; 3) Certified True Copy of the Transfer Certificate of Title (TCT); 4) Certified True Copy of the Tax Declaration; 5) Certification from the Social Housing Finance Corporation (SHFC) that the property was acquired through CMP; 6) Certified true copy of the Articles of Incorporation of the community association; 7) Partial Release of Real Estate Mortgage; 8) HLURB Certificate of Registration; 9) HLURB License to Sell; 10) Verification slip of the Seller and the Buyer; and 11) Other pertinent documents . In reply, please be informed that the transfer in favor of your individual member-beneficiary of the said subdivided property is not subject to either the capital gains tax imposed under Section 27 (D) (5) of the Tax Code of 1997, as amended, or the creditable withholding tax imposed under Revenue Regulations No. 2-98, as amended, implementing Section 57 (B) of the same Code, considering that the said transfer of property is without any consideration since it is merely a formality to finally effect the transfer of the said property to your member-beneficiary who actually bought the same from the former owner through your Association. In other words, the association is in fact transferring the ownership of the property to its member-beneficiary who actually owns the same. Furthermore, the said transfer is not subject to the donor's tax imposed under Section 99 of the Tax Code of 1997, since there is no donative intent or intention on your part to donate the said property to said member-beneficiary, considering that you could not donate property the ownership of which belongs to the donee (member-beneficiary) himself. (BIR Ruling No. 005-11 dated January 19, 2011 and BIR Ruling No. 367-11 dated October 5, 2011) It is noted that under Section 196 of the Tax Code of 1997, the deeds or documents subject to the documentary stamp tax imposed therein are those where the realty sold shall be granted, assigned, transferred, or otherwise conveyed to a purchaser or purchasers or to any other person or persons designated by such purchaser or purchasers, thereby excluding from its purview the instant case considering that the supposed purchaser is actually the owner thereof. TcSHaD Accordingly, the transfer of title of the said property in favor of your member-beneficiary is not subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. However, the notarial acknowledgment to said deed of conveyance is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the Tax Code of 1997. (BIR Ruling No. 005-11 dated January 19, 2011 and BIR Ruling No. 367-11 dated October 5, 2011) It is, however, understood that the Certificate Authorizing Registration (CAR) shall only be issued after the submission of the requirements provided under RMO 15-2003 and after it is established upon proper verification by the Revenue District Officer (RDO) concerned that, considering the rules on valuation of real property, the actual selling price per sale transaction of the house and lot packages in this case does not really exceed P400,000.00 and P160,000.00 for lot only. Thus, sale of a house and lot or lot only above the maximum amount shall be subject to the corresponding internal revenue taxes. (BIR Ruling No. 005-11 dated January 19, 2011 and BIR Ruling No. 367-11 dated October 5, 2011) 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. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue