BIR Ruling No. 427-15

December 17, 2015 BIR RULING NO. 427-15 RA No. 7279; BIR Ruling No. 109-13; BIR Ruling No. 304-13 Malag-it Homeowners Association, Inc. Brgy. Malag-it, Pontevedra, Capiz Attention : Rustico D. Ortiz, Jr. President Gentlemen : This refers to the letter of Ma. Ana R. Oliveros, President of the Social Housing Finance Corporation (SHFC) dated February 17, 2015, endorsing the sale transaction between Kaguyuman Lending (KALI), Inc. and Malag-it 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". HEITAD Documents submitted disclose that Kaguytiman Lending (KALI), Inc. is the registered owner of thirty five (35) parcels of land covered by the following Transfer Certificates of Title (TCT): TCT No. Tax Lot Blk. PSD Area Declaration No. No. No. (sq.m.) 089-2013000247 19-0313 7 1 06-08000496 100 089-2013000249 19-0311 9 1 06-08000496 100 089-2013000250 19-0310 10 1 06-08000496 100 089-2013000251 19-0309 11 1 06-08000496 100 089-2013000252 19-0308 12 1 06-08000496 100 089-2013000253 19-0307 13 1 06-08000496 100 089-2013000255 19-0305 15 1 06-08000496 100 089-2013000256 19-0304 16 1 06-08000496 100 089-2013000257 19-0303 17 1 06-08000496 100 089-2013000258 19-0302 18 1 06-08000496 100 089-2013000259 19-0301 19 1 06-08000496 100 089-2013000261 19-0299 21 1 06-08000496 100 089-2013000262 19-0357 22 1 06-08000496 100 089-2013000263 19-0358 23 1 06-08000496 100 089-2013000264 19-0359 24 1 06-08000496 100 089-2013000276 19-0331 11 2 06-08000496 100 089-2013000277 19-0330 12 2 06-08000496 108 089-2013000281 19-0334 16 2 06-08000496 117 089-2013000283 19-0337 18 2 06-08000496 119 089-2013000284 19-0339 19 2 06-08000496 100 089-2013000286 19-0340 21 2 06-08000496 100 089-2013000287 19-0341 22 2 06-08000496 119 089-2013000291 19-0345 26 2 06-08000496 119 089-2013000293 19-0346 28 2 06-08000496 109 089-2013000295 19-0348 30 2 06-08000496 72 089-2013000301 19-0351 6 3 06-08000496 100 089-2013000302 19-0350 7 3 06-08000496 100 089-2013000304 19-0363 2 4 06-08000496 100 089-2013000305 19-0364 3 4 06-08000496 100 089-2013000306 19-0365 4 4 06-08000496 100 089-2013000313 19-0373 7 5 06-08000496 100 089-2013000318 19-0378 2 6 06-08000496 145 089-2013000319 19-0379 3 6 06-08000496 126 089-2013000322 19-0382 6 6 06-08000496 100 089-2013000323 19-0384 7 06-08000496 348 Total Area 3,882 ======= all issued by the Registry of Deeds of Roxas, Capiz. The aforesaid properties are situated at Brgy. Malag-it, Pontevedra, Capiz. Malag-it Homeowners Association, Inc. (TIN 295-033-727-000), on the other hand, is a homeowner's organization duly registered with the Housing and Land Use Regulatory Board (HLURB). On May 8, 2014, the parties executed a Deed of Absolute Sale whereby KALI transferred and conveyed the subject properties to Malag-it Homeowners Association, Inc. at an agreed price of One Million Seven Hundred Forty Six Thousand Nine Hundred Pesos (P1,746,900.00). Pursuant to the certification issued by SHFC, the subject properties covered by above-mentioned TCTs actually comprise a Community Mortgage Program (CMP) Project and shall be proportionately distributed to the association's qualified member-beneficiaries. 1 For this purpose, Malag-it 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 on February 16, 2015. In support of its request, Malag-it Homeowners Association, Inc. has completely submitted on September 4, 2015 the following documents: 1) SHFC letter application for tax exemption; 2) Certification of the President of the SHFC that the subject properties qualify and actually comprise a CMP project; 3) SHFC Letter-Guaranty No. CMP-0978; 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 TCTs and Latest Tax Declarations of the Property 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" ATICcS the landowner who sold its properties under CMP for use in a socialized housing project are exempt from the payment of capital gains tax. Such being the case, the sale by Kaguyuman Lending (KALI), Inc. to Malag-it Homeowners Association, Inc. of the subject properties covered by above-mentioned TCTs 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 Certificate 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 property, to the effect that the said property shall be used for socialized housing pursuant to RA No. 7279. (BIR Ruling No. 109-13 dated March 21, 2013) 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 landowners are liable to pay the documentary stamp tax on the document conveying the afore-stated property imposed under Section 196 of the Tax Code of 1997, based on the consideration contracted to be paid for such realties or their fair market values determined in accordance with Section 6 (E) of the said Code, whichever is higher. (BIR Ruling No. 109-13 dated March 21, 2013) 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 subject properties covered by above-mentioned TCTs by the landowner to Malag-it Homeowners Association, Inc. is exempt from the imposition of VAT. (BIR Ruling No. 304-2013 dated August 6, 2013) 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 RMO15-2003. (BIR Ruling No. 109-13 dated March 21, 2013) 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 sellers are entitled to exemption from capital gains tax or income tax imposed under Sec. 24 (D) (1) the Tax Code of 1997, as amended. 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. TIADCc Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue ANNEX Malag-it Homeowners Association, Inc . Brgy. Malag-it, Pontevedra Capiz Name of Beneficiary Blk. No. Lot No. Total Area (sq.m.) 1 Furro, Marilyn D. 1 7 109.85 2 Orlina, Ma. Emily D. 1 9 109.85 3 Diaz, Rey D. 1 10 109.85 4 Hontiveros, Michael D. 1 11 109.85 5 Beatriz, Cyd G. 1 12 109.85 6 Bentillo, Evangeline B. 1 13 109.85 7 Dadivas, Ma. Jessel B. 1 15 109.85 8 De Asis, Jose Leslie B. 1 16 109.85 9 Buenvineda, Edison R. 1 17 109.85 10 Bonite, Noriel Jr. B. 1 18 109.85 11 Nono, Melenia B. 1 19 109.85 12 Dalmino, Gerry Jr. C. 1 21 109.85 13 Mosquete, Margie D. 1 22 109.85 14 Dela Cruz, Lovelyn M. 1 23 109.85 15 Denaga, Marriane Joe B. 1 24 109.85 16 Tapang, Lourdes B. 2 11 109.85 17 Ortiz, Rustico Jr. D. 2 12 118.63 18 Bacaro, Wilmar H. 2 16 128.52 19 Bacaro, Barbara H. 2 18 130.72 20 Ballejo, Emelia L. 2 19 109.85 21 Lopez, Emma V. 2 21 109.85 22 Bilangbilang, Charlyn C. 2 22 130.72 23 Dinglasan, Christian Ian L. 2 26 130.72 24 Bernales, Marbene A. 2 28 119.73 25 Akol, Amalia D. 2 30 79.09 26 Mariano, Chandelyn B. 3 6 109.85 27 Bermudo, Melda B. 3 7 109.85 28 Catalan, Willy B. 4 2 109.85 29 Abao, Jose Augie V. 4 3 109.85 30 Denaga, Nida May T. 4 4 109.85 31 Galera, Analyn F. 5 7 109.85 32 Abecia, Ma. Concepcion D. 6 2 159.28 33 Ignacio, Emy Grace D. 6 3 138.41 34 Dangan, Vicente Jr. B. 6 6 109.85 Footnotes 1. See Annex for the masterlist of qualified beneficiaries.