BIR Ruling No. 428-13

November 14, 2013 BIR RULING NO. 428-13 RA No. 7279; BIR Ruling No. 109-13 Solid Friendship Homeowners' Association, Inc. No. 258 Vergel St., Brgy. 119, Zone 14, Pasay City Attention: Flaviana L. Alcantara President Gentlemen : This refers to the letter of Ma. Ana R. Oliveros, President of Social Housing Finance Corporation (SHFC) dated June 24, 2013, endorsing the sale transaction between Felicidad Perez, et al. and Solid Friendship 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". Documents submitted disclosed that Felicidad Perez, Roland C. Perez married to Alicia Aradanas, Rosemarie P. Puno married to Ronaldo Puno, Romel C. Perez married to Divina Salosa, Dorothy P. Villas married to Oliver Villas, Rochelle P. Castro married to Gerald Castro are the registered owners of a parcel of land, identified as Lot 2 of the consolidation-subdivision plan (LRC) Pcs-1493, being a portion of the consolidation of Lots 3016 and 3552, both Pasay Cadastre, LRC (GLRO) Cad Record No. 1368 covered by Transfer Certificate of Title (TCT) No. 003-2011000613 issued by the Registry of Deeds for Pasay City. The aforesaid property is situated at San Roque, Pasay City with an area of Five Hundred Ninety square meters (590 sq.m.), more or less. Solid Friendship Homeowners' Association, Inc. (TIN 249-216-898-000), on the other hand, is a homeowner's organization duly registered with the Housing and Land Use Regulatory Board (HLURB). On March 6, 2013, the parties executed a Deed of Absolute Sale whereby the owners, thru their Attorney-in-Fact, Lolita R. Cambel, transferred and conveyed subject property to Solid Friendship Homeowners' Association, Inc. at an agreed price of Three Million One Hundred Eighty Six Thousand Pesos (P3,186,000.00). Pursuant to the certification issued by SHFC, the property covered by TCT No. 003-2011000613 is actually a Community Mortgage Program (CMP) Project and shall be proportionately distributed to the association's qualified member-beneficiaries. 1 For this purpose, Solid Friendship 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). STEacI In support of its request, Solid Friendship Homeowner's Association, Inc. has completely submitted on July 5, 2013 the following documents: 1) SHFC letter application for tax exemption; 2) Certification of the President of the SHFC that the subject property qualifies and is actually a CMP project; 3) Certified true copy of the Letter-Guaranty; 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 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 Sections 20 and 32 of RA No. 7279, pertinent portions of which state that: TaHDAS "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: (d) Exemption from the payment of the following: (2) Capital gains tax on raw lands used for the project; xxx xxx xxx. 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 Solid Friendship Homeowners' Association, Inc. of the properties covered by TCT T-003-2011000613 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 caused to 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. 20 of RA 7279. Accordingly, the landowner is 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 realty or its fair market value determined in accordance with Section 6 (E) of the said Code, whichever is higher. (BIR Ruling No. 109-13 dated March 21, 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 title 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. 109-13 dated March 21, 2013) AHDacC 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 Solid Friendship Homeowners' Association, Inc. No. 258 Vergel St., Brgy. 119, Zone 14, Pasay City Name of Beneficiary Lot No. Total Area 1 Teresa Magallanes 1 17.17 2 Jamie L. Alcantara 2 17.17 3 Mark L. Alcantara 3 17.17 4 Wilma L. Monzales 4 17.17 5 Nia Loraine M. Puzon 5 17.17 6 Vanessa S. Estonina 6 17.17 7 Rechell P. Pablo 7 17.17 8 Federico Villanueva Jr. 8 17.17 9 Virgilio Lacsamana 9 17.17 10 Rizalde C. Lacsamana 10 17.17 11 Jomaricor Mariano 11 17.17 12 John Angelo Mariano 12 17.17 13 Ramil G. Mariano 13 17.17 14 Princess Mae Ferrer 14 17.17 15 Johanna Mariano 15 17.17 16 Genevieve J. Cunanan 16 17.17 17 Mark Castuera 17 17.17 18 Myrna Castuera 18 17.17 19 Oliver Ryan Garcia 19 17.17 20 Herbert Garcia 20 17.17 21 Rodolfo P. Salinas, Jr. 21 17.17 22 Rudolf P. Salinas 22 17.17 23 Nio Edison Guera 23 17.17 24 Guerlan Punzalan 24 17.17 25 Lowella L. Gucilatar 25 17.17 26 Johnny R. Leynes 26 17.17 27 Amie B. Quintana 27 17.17 28 Armando Bermudez 28 17.17 29 Nerissa Barcoma 29 17.17 30 Eric Valdez 30 17.17 31 Edgardo Valdez 31 17.17 32 Rosauro Cunanan 32 17.17 33 Rhea Eden Asilum 33 20.85 34 Regino Lacsamana 34 19.63 Footnotes 1. See Annex for the masterlist of qualified beneficiaries.