BIR Ruling No. 428-15

December 17, 2015 BIR RULING NO. 428-15 RA No. 7279; BIR Ruling No. 109-13 Bamboo Groove Homeowners Association, Inc . Brgy. Basak, San Nicolas, Cebu City Attention : Priscilla E. Amar President Gentlemen : This refers to the letter of Ma. Ana R. Oliveros, President of the Social Housing Finance Corporation (SHFC) dated February 16, 2015, endorsing the sale transaction between Antero M. Bongbong, married to Rosario Vendiola Bongbong, and Bamboo Groove 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". cSEDTC Documents submitted disclose that Antero M. Bongbong, married to Rosario Vendiola Bongbong, (hereinafter referred to as Landowner) is the registered owner of a parcel of land, identified as Lot 5124 of the cadastral survey of Cebu, LRC Cad. Record No. 9469 covered by Transfer Certificate of Title (TCT) No. 55656 issued by the Registry of Deeds for the City of Cebu. The aforesaid property is situated at Brgy. Basak, San Nicolas, Cebu with an area of One Thousand Twenty Six square meters (1,026 sq.m.), more or less. Bamboo Groove Homeowners Association, Inc. (TIN 435-308-049-000), on the other hand, is a homeowner's organization duly registered with the Housing and Land Use Regulatory Board (HLURB). On April 25, 2014, the parties executed a Deed of Absolute Sale whereby the Landowner transferred and conveyed the subject property to Bamboo Groove Homeowners Association, Inc. at an agreed price of Three Million Five Hundred Ninety One Thousand Pesos (P3,591,000.00). Pursuant to the certification issued by SHFC, the subject property covered by TCT No. 55656 actually comprise a Community Mortgage Program (CMP) Project and shall be proportionately distributed to the association's qualified member-beneficiaries. 1 For this purpose, Bamboo Groove 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 12, 2015. In support of its request, Bamboo Groove 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 property qualifies and is actually a CMP project; 3) SHFC Letter-Guaranty No. CMP-0977; 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 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 landowner who sold his 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 Antero M. Bongbong, married to Rosario Vendiola Bongbong, to Bamboo Groove Homeowners Association, Inc. of the subject property covered by TCT No. 55656 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) SDAaTC 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. 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. AaCTcI Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue ANNEX Bamboo Groove Homeowners Association, Inc . Brgy. Basak, San Nicolas, Cebu City Name of Beneficiary Blk. No. Lot No. Total Area (sq.m.) 1 Cabizares, Edna C. 1 1 25.71 2 Cabizares, Rosario Elizabeth L. 1 2 25.71 3 Cabizares, Julius C. 1 3 25.71 4 Dillatan, Marivic P. 1 4 25.71 5 Dayona, Mark Louie D. 1 5 25.71 6 Abordo, Lucia D. 1 6 25.71 7 Amar, Priscilla E. 1 7 25.71 8 Paquera, Sheila C. 2 1 25.71 9 Paquera, Joseph Florence C. 2 2 25.71 10 Paquera, Ronell C. 2 3 25.71 11 Hisola, Juliet S. 2 4 25.71 12 Ponce, Tessie A. 2 5 25.71 13 Lungay, Rovelita P. 3 1 33.43 14 Aloro, Elsa B. 3 2 32.14 15 Baliquatro, Sally J. 3 3 32.14 16 Juera, Ferdinand B. 3 4 32.14 17 Quibido, Douglas C. 3 5 32.14 18 Pasay, Reinold H. 3 6 32.14 19 Ricafort, Ludy Q. 4 1 29.57 20 Palumar, Vilma Q. 4 2 25.71 21 Amad, Marlon E. 4 3 25.71 22 Layam, Rowena T. 4 4 27.00 23 Torino, Rosemarie D. 4 5 25.71 24 Maribao, Lucila T. 4 6 25.71 25 Cataylo, Mary Jane A. 4 7 25.71 26 Quibido, Nilda C. 4 8 29.57 27 Labajo, Adrian B. 5 1 25.71 28 Gilay, Gomer A. 5 2 25.71 29 Paquera, James C. 5 3 25.71 30 Villacorta, Wilfredo O. 5 4 25.71 31 Tibon, Stephen P. 5 5 25.71 32 Yap, Penilope G. 5 6 25.71 33 Talledo, Mary Lyn F. 5 7 25.71 34 Cardama, Charlyn A. 5 8 25.71 35 Astacaan, Christopher T. 5 9 25.71 36 Amaba, Janeth S. 5 10 25.71 37 Gerat, Rogelyn C. 5 11 25.71 38 Great, Anna Lee C. 5 12 25.71 Footnotes 1. See Annex for the masterlist of qualified beneficiaries.