BIR Ruling No. 425-15

December 17, 2015 BIR RULING NO. 425-15 RA No. 7279; BIR Ruling No. 053-15 Ugnayan Saranay Homeowners' Association, Inc. Phase I Saranay St., Bagumbong, Caloocan City Attention: Santiago I. Rivera President Gentlemen : This refers to the letter of Ma. Ana R. Oliveros, President of Social Housing Finance Corporation (SHFC) dated July 22, 2015, endorsing the sale transaction between G.B. Francisco, Inc. and Ugnayan Saranay Homeowners' Association, Inc. Phase I 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". IDTSEH Documents submitted disclose that G.B. Francisco, Inc. (TIN 000-458-195-000) (hereinafter referred to as Landowner) is the registered owner of a parcel of land, identified as Lot No. 605-B, Plan No. (LRA) Psd-431082, Portion of RS-00-000481 covered by Transfer Certificate of Title (TCT) No. 001-2014001207 issued by the Registry of Deeds for Caloocan City. The aforesaid property is situated at Kingstown II/Saranay Subd., Brgy. 171, Caloocan City with an area of Six Thousand Nine Hundred Ninety Four square meters (6,994 sq.m.), more or less. Ugnayan Saranay Homeowners' Association, Inc. Phase I (TIN: 257-184-497-000), on the other hand, is a homeowner's organization registered with the Housing and Land Use Regulatory Board (HLURB). On June 10, 2015, the parties executed a Deed of Absolute Sale whereby the Landowner transferred and conveyed Five Thousand Nine Hundred Two square meters (5,902 sq.m.) portion of the subject property to Ugnayan Saranay Homeowners' Association, Inc. Phase I at an agreed price of Ten Million Six Hundred Twenty Three Thousand Six Hundred Pesos (P10,623,600.00) under Community Mortgage Program (CMP) of the SHFC. Pursuant to the certification issued by SHFC, 5,902 sq.m. out of 6,994 sq.m. covered by TCT No. 001-2014001207 actually comprise a CMP Project and shall be proportionately distributed to the association's qualified member-beneficiaries. 1 For this purpose, Ugnayan Saranay Homeowners' Association, Inc. Phase I 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, Ugnayan Saranay Homewners' Association, Inc. Phase I has completely submitted on July 31, 2015 the following documents: 1) SHFC letter application for tax exemption; SICDAa 2) Certification of the President of the SHFC that 3,902 sq.m. portion of the subject property qualifies and is actually a CMP project; 3) Certified true copy of the Letter-Guaranty No. 1097; 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; 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 Ugnayan Saranay Homeowners' Association, Inc. Phase I of the 5,902 sq.m. portion out of 6,994 sq.m. covered by TCT No. 001-2014001207 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. 053-13 dated February 27, 2015) DHIcET 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 5,902 sq.m. portion out of 6,994 sq.m. covered by TCT No. 001-2014001207 by the landowner to Ugnayan Saranay Homeowners' Association, Inc. Phase I 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 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 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 Ugnayan Saranay Homeowners' Association, Inc. Phase I Saranay St., Bagumbong, Caloocan City Name of Beneficiary Blk. Lot Total Area No. No. (sq.m.) 1 Fernandez, Rudy Delfin 1 1 52.13 2 Rivera, Rosemarie Ignacio 1 2 50.44 3 Cometa, Joenar De Torres 1 3 50.44 4 Cortes, Aaron Jayson Soriente 1 4 50.44 5 Cortes, Raindy Serrano 1 5 50.44 6 Pimentel, Ryan Agaloscos 1 6 50.44 7 Santic, Nerissa T. 1 7 50.44 8 Dacoro, Arnel Pancho 1 8 50.44 9 Aldave, Joelyn Viana 1 9 50.44 10 Aldave, Aristeo Viana 1 10 50.44 11 Velmonte, Sharmine Maturan 1 11 50.44 12 Velmonte, Cecilio Lina 1 12 50.44 13 Galano, Ferdy Oamil 1 16 50.44 14 Galano, Edmund Oamil 1 17 50.44 15 De Guzman, Mark Jayson Rivera 1 18 55.49 16 Tungol, Maritess Mallari 2 5 50.44 17 Rivera, Santiago Ignacio 2 7 50.44 18 Secretario, Primitiva Rivera 2 9 50.44 19 Talla, Francisco Tolentino 2 10 50.44 20 Cantal, May Anne Cabiles 2 11 50.44 21 Bolante, Gemalyn Macain 2 12 50.44 22 Maranan, Ralph Jibrel Claveria 2 13 50.44 23 Nartates, Armenio Abata 2 15 50.44 24 Despogado, John Davith Ramirez 2 16 50.44 25 Bernabe, Rosalyn Suaso 2 17 50.44 26 Despogado, Jonna Jane Ramirez 2 18 50.44 27 Pielago, Ricona Catindig 2 19 50.44 28 Waje, Kenneth Punzalan 2 20 50.44 29 Centeno, Lucila Datuin 2 21 50.44 30 Waje, Ricabel Punzalan 2 22 50.44 31 Salagan, Chito Quibang 2 23 50.44 32 Waje, Reynalda Punzalan 2 24 50.44 33 Silvano, Alicia Punzalan 2 26 50.44 34 Arao, Renelyn Rose Watkins 2 28 50.44 35 Tomagan, Lemuel Gailo 2 30 50.44 36 Abundo, Darell R. 2 31 50.44 37 Gianan, Markgil O. 2 32 50.44 38 Abundo, Jill Irelad T. 2 33 50.44 39 Hermano, Gerry Malaqui 2 34 57.17 40 Cebido, Elsie Carasco 2 35 55.49 41 Rosal, Victoria De Guzman 2 36 53.81 42 De Guzman, Leoncia Rivera 2 37 55.49 43 Martinez, Maria Rheena Sumile 3 1 52.13 44 Andes, Clarita Tolentino 3 2 52.13 45 Andes, Ma. Victoria Tolentino 3 3 52.13 46 Martinez, Mary Florifhel Sumile 3 4 52.13 47 Chua, Dulce Ranada 3 5 52.13 48 Panol, Nelda M. 3 6 52.13 49 Gumabay, Alexander Silvestre 3 7 52.13 50 Adato, Noriel Irinco 3 9 52.13 51 Panol, Levi Lavena 3 10 52.13 52 Arcilla, Babylyn Panahon 3 11 52.13 53 Sarmiento, Enrique Silvestre 3 15 52.13 54 Andes, Jinky Robina 3 18 52.13 55 Balinado, Michael John De Guzman 3 19 52.13 56 De Leon, Diosdado Acierto 3 20 52.13 57 De Leon, Gloria Balinado 3 21 52.13 58 Mustapha, Jalil Rimbang 3 22 52.13 59 Omar, Mesug Bantas 3 23 52.13 60 Umbaro, Mohaimen Magigirid 3 24 52.13 61 Ramirez, Susan Dela Cruz 3 25 52.13 62 Sinamban, Erwin Jay P. 3 26 50.44 63 Sinamban, Beatriz Palisoc 3 27 50.44 64 Talisic, Rina Baturiano 3 28 50.44 65 Hije, Maria Marisa Hachaso 4 1 68.94 66 Zacarias, Alim Galicia 4 2 50.44 67 Zacarias, Algene Galicia 4 3 55.49 68 Sangui, Marife Hije 4 4 50.44 69 De Asis, Jujet Pacsis 4 5 53.81 70 Santos, Lucresia Montajes 4 6 50.44 71 Magarro, Hermanigilda Nolasco 4 7 55.49 72 Campano, Ernesto Alegain 4 8 50.44 73 Pabunan, Rolando Tabian 4 9 57.17 74 Magarro, Menerva Nolasco 4 10 50.44 75 Alvarado, Menandro Jose Gotladera 4 11 50.44 76 Janolo, Marichu Banaga 4 12 50.44 77 Janolo, Emerita Dionisio 4 13 50.44 78 Janolo, Sharon Dionisio 4 14 50.44 79 De Vera, Marjorie Janolo 4 15 50.44 80 Simpliciano, Arnel Tolentino 4 16 57.17 81 Rapisura, Nora Rigos 4 17 50.44 82 Nicolas, Romeo Jr. Pascual 4 18 50.44 83 Valenzuela, Marigrace Pancho 5 1 52.13 84 Valenzuela, Randolf Ramos 5 2 48.76 85 Valenzuela, Joy Sharon Ramos 5 3 50.44 86 Lopez, Antonio Cruz 5 4 50.44 87 Semiano, Jennifer Aguila 5 5 52.13 88 Bernabe, Benjie Pasos 5 6 52.13 89 Legaspi, Iresh Grace Mijares 5 9 52.13 90 Apdian, Napoleon Ancero 5 11 52.13 91 Apdian, Norland Napoles 5 12 52.13 92 Bernal, Jacquilene Valenzuela 5 13 52.13 93 Bernal, Benjamin Valenzuela 5 14 52.13 94 Alejaga, Jommel Garcia 5 15 58.85 95 Pascual, Fraida Galicha 5 16 60.53 96 Dagohoy, Richard Jose Ociones 5 17 58.85 97 Dagohoy, Vanessa Cristy Ociones 5 18 58.85 98 Lapinig, Evelyn Logronio 5 19 50.44 99 Panol, Bernie Lavena 5 20 50.44 100 Candelaria, Cecelia Saquillo 5 21 50.44 101 Berza, Jenalin Piornato 5 22 50.44 102 Berza, Jocelyn Piornato 5 23 50.44 103 Lim, Mario Lobaton 5 24 50.44 104 Tolentino, Jannie Ramos 5 25 50.44 105 Tugadi, Dominga Vicente 5 26 50.44 106 Arroyo, Jayson Quinto 5 27 50.44 107 Sarmiento, Analina Quinto 5 28 50.44 108 Lozada, Cecilia Rivera 5 29 50.44 109 Lozada, Catalino Rivera 5 30 50.44 110 Panol, Ericson Lavena 6 1 50.44 111 Panol, Merly Lavena 6 2 50.44 112 Rosas, Lavinia Lavena 6 3 50.44 113 Pasquin, Angeles Espuertas 6 4 50.44 114 Pasquin, Anita Enaje 6 5 50.44 Footnotes 1. See Annex for the masterlist of qualified beneficiaries.