BIR Ruling No. 425-14

October 27, 2014 BIR RULING NO. 425-14 RA 7279; RR 11-97;BIR Ruling No. 036-2014 Goldenville Realty and Development Corporation 3368 Harvard Street, Pinagkaisahan Makati City Attention: Ida Abendano-Guintu President and General Manager Gentlemen : This refers to your letter dated July 26, 2011 requesting tax exemption on the transfer of titles of the purchased properties in Brgy. Gaya-Gaya, San Jose del Monte City pursuant to Republic Act (R.A.) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". Documents submitted show that Goldenville Realty and Development Corporation with Tax Identification Number 002-562-057-000, is the absolute and registered owner of parcels of land located at Brgy. Gaya-Gaya, San Jose del Monte City, covered by Transfer Certificate of Titles, to wit: TCT No. Area (Sq. M.) Tax Declaration No. 040-2011014035 1 68,802 99-21012-35707 040-2011014034 2 12,129 99-21012-35706 040-2011014033 3 4,523 99-21012-35705 85,454 ===== On July 6, 2011, a Contract Agreement was executed by and between Goldenville Realty and Development Corporation and AFP Housing Homeowners Association, Inc. and PNP Housing Homeowners Association, Inc., a homeowner's organization registered with the Housing and Land Use Regulatory Board (HLURB), whereby Goldenville Realty and Development Corporation has agreed to sell to AFP Housing Homeowners Association, Inc. and PNP Housing Homeowners Association, Inc.'s individual members the developed lots and completed housing units covered by the said Titles under the Community Initiative Approach Program (CIAP) of the National Housing Authority (NHA) in the amount of Php175,000.00 per member/family for Package I and or a House and Php208,000.00 per member/family for Package II. cDCEHa Moreover, on July 6, 2011, a Memorandum of Agreement (MOA) for developed lots & completed housing units, was executed by and among Goldenville Realty and Development Corporation as the landowner/developer, AFP Housing Homeowners Association, Inc. and PNP Housing Homeowners Association, Inc., as the beneficiaries, and the NHA, as the implementing government agency for the AFP/PNP Housing Program as cited under Administrative Order No. 9 dated April 11, 2011. Under the MOA, members of the AFP Housing Homeowners Association, Inc. and PNP Housing Homeowners Association, Inc., shall be provided by the NHA with a financial grant for the acquisition house and lot packages in the AFP/PNP Housing Project through the Community Initiative Approach Program in the amount of Php175,000.00 for a House and Lot Package of thirty six square meters (36.00 sq.m.) lot and twenty two square meters (22.00 sq.m.) floor area and Php208,000.00 for a House and Lot Package of forty square meters (40.00 sq.m.) lot and eighteen square meters (18.00 sq.m.) floor area. On October 14, 2011, Goldenville Realty and Development Corporation and the NHA executed a Deed of Conveyance whereby the owner, transferred and conveyed, 2,720 house and lot packages with an aggregate area of fifty four thousand one hundred forty square meters (54,140 sq.m.) of the properties covered by TCT No/s. 040-2011014035, 040-2011014034 and 040-2011014033 was sold to NHA for One Hundred Forty Seven Million Three Hundred Thousand Pesos (P147,300,000.00). In support of your above request, you submitted the following documents: 1) Certified true copy of the SEC Registration of the Corporation; 2) Certified true copy of the Articles of Incorporation; 3) BIR Certificate of Registration; 4) Copies of HLURB Certificates of Registration of AFP Housing Homeowners Association Incorporation and the PNP Housing Homeowners Association Incorporation; 5) Notarized copy of Deed of Conveyance dated October 14, 2011 between Goldenville Realty and Development Corporation and the National Housing Authority; ECcTaH 6) Contract of Agreement with Goldenville Realty and Development Corporation and AFP Housing Homeowners Association Incorporation and the PNP Housing Homeowners Association Incorporation; 7) Copy of the Memorandum of Agreement by and among Goldenville Realty and Development Corporation, AFP Housing Homeowners Association Incorporation and the PNP Housing Homeowners Association Incorporation and National Housing Authority; 8) Certified True Copies of the Transfer Certificate of Titles and Tax Declarations; 9) Affidavit of Non-Forum Shopping; 10) Other pertinent documents. 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. "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: (1) Project-related income taxes; (2) Capital Gains Tax; ASaTCE (3) Value-added tax for the project contractor concerned;" xxx xxx xxx" the landowners/developers of properties who sell their properties for use in a socialized housing project are exempt from the payment of the project-related income taxes. Such being the case, the sale of 2,720 house and lot packages on the fifty four thousand one hundred forty square meters (54,140 sq.m.) portion of the properties covered by TCT No/s. 040-2011014035, 040-2011014034 and 040-2011014033 by Goldenville Realty and Development Corporation to NHA is exempt from capital gains tax, project-related income taxes and consequently from withholding tax. (BIR Ruling No. 036-2014 dated January 29, 2014) 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. 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 Goldenville Realty and Development Corporation to NHA of 2,720 house and lot packages on the fifty four thousand one hundred forty square meters (54,140 sq.m.) portion of the properties covered by TCT No/s. 040-2011014035, 040-2011014034 and 040-2011014033, are likewise exempt from documentary stamp tax imposed under Section 196 of the Tax Code of 1997, as amended. (BIR Ruling No. 036-2014 dated January 29, 2014) aTEScI Upon issuance of this letter of exemption, and upon registration of the documents of sale, a lien on the Certificates of Title of the land to be issued in the name of the NHA shall be caused to 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 R.A. No. 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 land 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. Moreover, Goldenville Realty and Development Corporation is likewise exempt from the payment of VAT on its gross receipts from the said project, involving the sale of 2,720 house and lot packages on the fifty four thousand one hundred forty square meters (54,140 sq.m.) portion of the properties covered by TCT No/s. 040-2011014035, 040-2011014034 and 040-2011014033. However, its purchases of goods/articles shall be subject to VAT, even if the said purchases are to be used for the socialized housing project, since VAT is an indirect tax which can be passed on by the seller of the goods/services. It shall be understood that Goldenville Realty and Development Corporation must issue non-VAT official receipts on its gross receipts from the said socialized housing project. 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 Footnotes 1. Formerly TCT No. 040-2011013637 replacing TCT No. 406046 (M). 2. Formerly TCT No. 040-2011009311 replacing TCT No. 121613 (M). 3. Formerly TCT No. 040-2011013638 replacing TCT No. 418 (M).