BIR Ruling No. 427-13

November 14, 2013 BIR RULING NO. 427-13 RA 7279; BIR Ruling No. 005-11; BIR Ruling No. 367-11 Kabatuhan Compound No. 3 Homeowners' Association, Inc. Sitio Kabatuhan 3 Gen. T. de Leon, Valenzuela City Attention: Harbin Maigue President Gentlemen : This refers to your letter dated December 10, 2012 requesting exemption from the payment of Capital Gains Tax and other taxes, relative to the transfer of titles of land from Kabatuhan Compound No. 3 Homeowners' Association, Inc. in favor of Mr. Harbin P. Maigue, Pedro Orivida Jr., Wilson Cayacay, Nelson Gono, Tomas Elauria and Ms. Violeta Orivida pursuant to Republic Act 7279 otherwise known as the "Urban Development and Housing Act of 1992". cTCEIS It is represented that Kabatuhan Compound No. 3 Homeowners' Association, Inc. is the registered owner of parcels of land covered by the following Transfer Certificates of Title (TCT),to wit: TCT No. Area (sq.m.) Tax Declaration No. V-57474 1 28 C-018-31348 V-57475 2 30 C-018-31349 V-57476 3 28 C-018-31350 V-57477 4 31 C-018-31351 V-57304 5 28 C-018-31202 V-57367 6 32 C-018-31248 issued by the Registry of Deeds for the Valenzuela Metro Manila, located at Brgy. General T. De Leon, Valenzuela City; that it is a non-stock, non-profit organization duly registered with the Housing and Land Use Regulatory Board (HLURB);that the aforesaid lots were 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 May 20, 1996 in the amount of Php15,405,616.73; that the SHFC issued a Partial Release of Real Estate Mortgage constituted above-described TCTs; and that the following are now in the process of transferring the purchased properties to their names by virtue of their respective Deeds of Absolute Sale, to wit: Name Date of Deed of TCT No. Absolute Sale Harbin P. Maigue December 21, 2012 V-57474 7 Pedro L. Orivida Jr. December 1, 2012 V-57475 8 Wilson C. Cayacay December 1, 2012 V-57476 9 Violeta L. Orivida December 1, 2012 V-57477 10 Sps. Nelson Gono & Luz Gono December 19, 2012 V-57304 11 Sps. Tomas Elauria & Teresa M. Elauria November 19, 2012 V-57367 12 In support of your request, you have completely submitted on June 27, 2013 the following documents: 1) Written Application for Exemption filed with the Law Division; 2) Deeds of Absolute Sale; 3) Certified True Copies of the Transfer Certificate of Title (TCT); 4) Certification from the Social Housing Finance Corporation (SHFC) that the property was acquired through CMP; ACIEaH 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) Certificates of Payment; 8) Partial Release of Real Estate Mortgage; 9) BIR Certificate of Registration; 10) Other pertinent documents. In reply, please be informed that the transfer in favor of your individual member-beneficiaries of the said subdivided properties 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 is merely a formality to finally effect the transfer of the said properties to your member-beneficiaries 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-beneficiaries who actually own 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 properties to each member-beneficiary, considering that you could not donate such properties the ownership of which belong to the donees (member-beneficiaries) themselves. (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. Accordingly, the transfer of titles of the said properties in favor of your member-beneficiaries 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) AECacS It is, however, understood that the respective Certificates 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 Footnotes 1. Formerly V-42008/T-205. 2. Ibid. 3. Ibid. 4. Ibid. 5. Ibid. 6. Ibid. 7. Lot 13 Blk. 14. 8. Lot 14 Blk. 14. 9. Lot 15 Blk. 14. 10. Lot 16 Blk. 14. 11. Lot 1 Blk. 5. 12. Lot 9 Blk. 8.