BIR Ruling No. 429-14

October 27, 2014 BIR RULING NO. 429-14 RA No. 7279; BIR Ruling No. 109-13 Bagong Pag-Asa Homeowner's Association, Inc. Sitio Awa, Bagong Pag-Asa Brgy. Catalunan Grande, Davao City Attention: Florence M. Briones President Gentlemen : This refers to the letter of Ma. Ana R. Oliveros, President of the Social Housing Finance Corporation (SHFC) dated July 14, 2014, endorsing the sale transaction between Spouses Francisco S. Alferez and Brenda B. Alferez and Bagong Pag-asa Homeowner's 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 disclose that spouses Francisco S. Alferez (TIN: 104-171-323-000) and Brenda B. Alferez (TIN: 139-605-442-000) (hereinafter referred to as Landowners) are the registered owners of a parcel of land, identified as Lot 3952-C, Psd-11-005214, being a portion of Lot 3952, Cad-102, Davao Cadastre covered by Transfer Certificate of Title (TCT) No. T-77420 issued by the Registry of Deeds for the City of Davao. The aforesaid property is situated at Brgy. Catalunan Grande, Davao City with an area of Sixteen Thousand Nine Hundred Ninety Nine square meters (16,999 sq.m.), more or less. Bagong Pag-asa Homeowner's Association, Inc. (TIN 293-208-817-000), on the other hand, is a homeowner's organization duly registered with the Housing and Land Use Regulatory Board (HLURB). On March 8, 2013, the parties executed a Deed of Absolute Sale whereby the Landowners transferred and conveyed Eight Thousand Ninety Two and 51/100 square meters (8,092.51 sq.m.) portion of the subject property to Bagong Pag-asa Homeowner's Association, Inc. at an agreed price of Three Million Five Hundred Forty Four Thousand Five Hundred Nineteen and 38/100 Pesos (3,544,519.38). Pursuant to the certification issued by SHFC, 8,092.51 sq.m. out of 16,999 sq.m. covered by TCT No. T-77420 actually comprises a Community Mortgage Program (CMP) Project and shall be proportionately distributed to the association's qualified member-beneficiaries. 1 For this purpose, Bagong Pag-asa Homeowner's 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 June 24, 2014. SHADcT In support of its request, Bagong Pag-asa Homeowner's Association, Inc. has completely submitted on July 25, 2014 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 Deed of Absolute Sale to the Community Association; 4) Certified true copy of the Articles of Incorporation of the Community Association; 5) Certified true copy of the Masterlist of Qualified Beneficiaries duly certified by the SHFC; 6) Certified true copies of the TCT and Latest Tax Declaration of the Property Sold to the Community Association; 7) Certified true copy of the Location Plan of the Lot Sold to the Community Association; 8) TIN ID/BIR Certificate of Registration of the seller and the Homeowner's Association; and 9) 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 landowners to Bagong Pag-asa Homeowner's Association, Inc. of the Eight Thousand Ninety Two and 51/100 square meters (8,092.51 sq.m.) portion out of Sixteen Thousand Nine Hundred Ninety Nine square meters (16,999 sq.m.) covered by TCT No. T-77420 is exempt from the capital gains tax. CaESTA 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 Homeowner's 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. 20 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 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) 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 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 Bureau of Internal Revenue ANNEX Bagong Pag-Asa Homeowner's Association, Inc. Sitio Awa, Bagong Pag-Asa Brgy. Catalunan Grande, Davao City Name of Beneficiary Blk. No. Lot No. Total Area (Sq.M.) 1 De Gracia, Reynaldo O. 1 12 170.33 2 Bag-Ao, Josephine A. 1 13 170.33 3 Loja, William P. 1 14 170.33 4 Valendez, Antonieta A. 2 2 136.27 5 Aquino, Celsa B. 2 3 136.27 6 Blanco, Corazon L. 2 4 136.27 7 Bagundang, Norhalid E. 2 5 136.27 8 Wida, Stella L. 2 6 136.27 9 Tanjay, Melodia L. 2 7 136.27 10 Pea, Vicente P. 2 8 136.27 11 Pea, Emilio P. 2 9 136.27 12 Cabreros, Narwin P. 2 10 136.27 13 Cabreros, Melchie Grace L. 2 11 136.27 14 Cabreros, Melver L. 2 12 136.27 15 Bobo, Rustico D. 2 13 136.27 16 Maintang, Oliver C. 2 14 136.27 17 Maglunob, Ariel P. 2 15 136.27 18 Gamboa, Ragaw M. 2 16 136.27 19 Lat, Teresa D. 2 17 136.27 20 Decina, Jojo H. 2 18 136.27 21 Villar, Catherine Joy C. 2 19 136.27 22 Casol, Mayan C. 2 20 136.27 23 Decena, Celsa P. 2 21 136.27 24 Asares, Rogelio M. 4 3 136.27 25 Gucela, Romuel M. 4 12 136.27 26 Taran, Vanessa C. 5 1 85.17 27 Taran, Noe M. 5 2 85.17 28 Polestico, Elizabeth A. 5 3 85.17 29 Gayamo, Alma C. 5 4 85.17 30 Batingana, Dive L. 5 5 85.17 31 Inocencio, Ilusidro A. 5 6 85.17 32 Makabante, Alma Flor M. 5 7 85.17 33 Abordo, Jerry L. 5 8 85.17 34 Babagonio, Menard M. 5 9 136.27 35 Abasolo, Frederico M. 5 10 136.27 36 Molit, Helen A. 5 11 136.27 37 Alba, Annaliza R. 5 12 136.27 38 Yu, Dante T. 5 13 136.27 39 Maintang, Amduna D. 5 14 156.71 40 Macabante, Allene M. 6 1 136.27 41 Briones, Florence M. 6 2 143.08 42 Batingana, Judith L. 6 3 136.27 43 Agad, John Paul A. 6 4 136.27 44 Eseque, Albert P. 6 5 136.27 45 Cuayzon, Benjamin V. Sr. 6 6 136.27 46 Eseque, Chona P. 6 7 136.27 47 Gallego, Leopoldo G. 6 8 136.27 48 Degorio, Remboy O. 6 9 136.27 49 Gallego, Virginia G. 6 10 136.27 50 Degorio, Eric O. 6 11 136.27 51 Andrade, Rey B. 6 12 136.27 52 Gallego, Marahani G. 6 13 136.27 53 Andrade, Jim B. 6 14 136.27 54 Talamo, Camilo R. 6 15 136.27 55 Alivio, Jimmilito A. 6 16 136.27 56 Caro, Ana Nina L. 6 17 136.27 57 Dumalag, Simplicio A. 6 18 136.27 58 Losaynon, Teresita A. 6 19 68.13 59 Lindo, Mary Jane R. 6 20 136.27 60 Lopez, Joan B. 6 21 68.13 61 Villapaz, Reynaldo L. 6 22 71.54 62 Galing, Alexander S. 6 23 71.54 63 Laguitao, Carmelita Y. 6 24 93.68 64 Adaya, Mericel B. 6 25 95.39 Footnotes 1. See Annex for the masterlist of qualified beneficiaries.