BIR Ruling No. 432-13

November 14, 2013 BIR RULING NO. 432-13 RA No. 7279; BIR Ruling No. 109-13 Virgen Del Rosario Homeowners Association, Inc. Brgy. Canitoan, Cagayan de Oro City Attention: Derby T. Pacudan President Gentlemen : This refers to the letter of Ma. Ana R. Oliveros, President of Social Housing Finance Corporation (SHFC) dated May 30, 2013, endorsing the sale transaction between A & F Development Corporation and Virgen Del Rosario 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 A & F Development Corporation (TIN 000-429-662-000), (hereinafter referred to as landowner) is the registered owner of a parcel of land, identified as Lot 18283-B, Psd-10-022983, being a portion of Lot 18283, Cad-237, Cagayan Cadastre covered by Transfer Certificate of Title (TCT) No. T-194406 issued by the Registry of Deeds for the Cagayan De Oro City. The aforesaid property is situated at Brgy. Canitoan, Cagayan de Oro City with an area of Forty Thousand square meters (40,000.00 sq.m.), more or less. Virgen Del Rosario Homeowners Association, Inc. (TIN 431-970-188-000), on the other hand, is a homeowner's organization duly registered with the Housing and Land Use Regulatory Board (HLURB) under Registration No. 12165 dated October 25, 2012. On March 14, 2013, the parties executed a Deed of Absolute Sale whereby the landowner transferred and conveyed, Twenty Thousand square meters (20,000 sq.m.) portion of the subject property to Virgen Del Rosario Homeowners Association, Inc. at an agreed price of Ten Million Pesos (P10,000,000.00). Pursuant to the certification dated March 14, 2013 issued by SHFC, Twenty Thousand square meters (20,000 sq.m.) out of the total of Forty Thousand square meters (40,000.00 sq.m.) covered by TCT No. T-194406 actually comprise a CMP Project and shall be proportionately distributed to the association's qualified member-beneficiaries. 1 For this purpose, Virgen Del Rosario Homeowners Association, Inc. secured a housing loan under the Community Mortgage Program (CMP), a financing assistance program of the SHFC a subsidiary of the National Home Mortgage Finance Corporation (NHMFC). In support of its request, Virgen Del Rosario Homeowners Association, Inc. has completely submitted on July 26, 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 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 landowner to Virgen Del Rosario Homeowners Association, Inc. of Twenty Thousand square meters (20,000 sq.m.) portion of the property covered by TCT No. T-194406 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 owner is liable to pay the documentary stamp tax on the documents 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. 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 Virgen Del Rosario Homeowners Association, Inc. Brgy. Canitoan, Cagayan de Oro City Name of Beneficiary Blk. Lot Total Area No No. (sq.m.) 1 Garingo, Cherilyn A. 1 1 170.29 2 Derit, Gina A. 1 2 168.61 3 Candare, Lucile A. 1 3 171.98 4 Sun, Angelyn E. 1 5 178.72 5 Picardal, Laarni J. 1 6 168.61 6 Abuhan, Marselita U. 1 7 168.61 7 Picardal, Joseph B. 1 8 168.61 8 Cabanes, Margarito P. 1 9 168.61 9 Miranda, Janet C. 1 10 168.61 10 Caunan, Bryan C. 1 11 168.61 11 Estoque, Jerome R. 1 12 168.61 12 Vo, Florence L. 1 13 168.61 13 Fellesco, Orsolo A. 1 14 168.61 14 Coroa, Christine May D. 1 15 168.61 15 Claunan, John Mark L. 1 16 168.61 16 Gamalo, Louige E. 1 17 168.61 17 Via, Rey Ronald C. 1 18 168.61 18 Reed, Asuncion M. 1 19 168.61 19 Maniha, Jade T. 1 20 168.61 20 Solidarios, Eugene G. 1 21 168.61 21 Templa, Erwin A. 1 22 168.61 22 Serran, Noel E. 1 23 168.61 23 Saluta, Rosabella Nale D. 2 1 205.70 24 Ardina, Jonathan D. 2 2 210.76 25 Maria, Enrique Jr. R. 2 3 168.61 26 Pitogo, Joefil A. 2 4 168.61 27 Aban, Edison M. 2 5 168.61 28 Abao, Aimee M. 2 6 168.61 29 Tidlos, Maribel P. 2 7 168.61 30 Sergi, Daiden M. 2 8 168.61 31 Pacudan, Jonathan A. 2 9 168.61 32 Moreno, Arlan P. 2 10 168.61 33 Pacudan, Derson T. 2 11 168.61 34 Moreno, Floro Jr. P. 2 12 168.61 35 Cane, Julius P. 2 13 168.61 36 Libay, Ramil A. 2 14 168.61 37 Pacudan, Derby T. 2 15 202.33 38 Galimba, Rene C. 2 16 214.13 39 Sandigan, Jenepy G. 3 1 200.64 40 Demorito, Rosanna A. 3 2 197.27 41 Robiato, Maricel T. 3 3 168.61 42 Roturas, Raymond D. 3 4 168.61 43 Robiato, Edgar Jr. O. 3 5 168.61 44 Fernandez, Jocilla C. 3 6 168.61 45 Balida, Siomemor T. 3 7 168.61 46 Quiao, Rona M. 3 8 168.61 47 Agbang, Alnie G. 3 9 168.61 48 Buaron, Marievic T. 3 10 168.61 49 Jandayan, Wendell D. 3 11 175.35 50 Jandayan, Walter D. 3 12 171.98 51 Taborada, Dioscoro Jr. D. 4 1 200.64 52 Ganzon, Philipp Mark Winston M. 4 2 180.41 53 Taborada, Loida D. 4 3 168.61 54 Mendez, Elvie M. 4 4 168.61 55 Magallon, Jenuine P. 4 5 168.61 56 Fernandez, Chita O. 4 6 168.61 57 Galleon, Andy A. 4 7 177.04 58 Abrea, Ronald B. 4 8 177.04 59 Tagubase, Renato 5 3 155.12 60 Colagbang, Gary L. 5 4 155.12 61 Vallente, Edmund, Jr. M. 5 5 155.12 62 Engwa, Rowena A. 6 1 148.37 63 Escatron, Felix B. 6 2 148.37 64 Ganzan, Mervin L. 6 3 148.37 65 Jandayan, Roel F. 6 4 148.37 66 Laloon, Bimbo A. 6 5 148.37 67 Lopecillo, Fausto, Jr. D. 6 6 148.37 68 Nangcas, Annaliza J. 6 7 148.37 69 Maturan, Jonathan D. 6 8 148.37 70 Samante, Julieneth M. 6 9 148.37 71 Ucab, Mario S. 6 10 148.37 72 Tagud, Maurillo Jr. G. 6 11 148.37 73 Gala, Raul, Jr. B. 6 12 148.37 74 Ugmad, Alfe J. 6 13 161.86 75 Uba, Wilfredo, Jr. C. 6 14 161.86 76 Cadiz, Jo-an May T. 6 15 161.86 77 Via, Elmer C. 7 1 183.78 78 Miole, Rosa L. 7 2 168.61 79 Polendey, Ian Duane L. 7 3 168.61 80 Jandayan, Eugenio G. 7 4 177.04 81 Tagadiad, Grace A. 7 5 202.33 82 Cape, Maryann B. 7 6 177.04 83 Servillon, Rebecca L. 8 1 141.63 84 Barcelona, Paul Marvi 8 2 141.63 85 Agan, Marlon N. 8 3 141.63 86 Clapero, Alexander T. 8 4 141.63 87 Aguilar, Alex L. 8 5 141.63 88 Rosales, Mary Jean V. 8 6 141.63 89 Dacio, Ramil C. 8 7 148.37 90 Dacio, Josephine J. 8 8 163.55 91 Dacio, Mark Ray C. 8 9 163.55 92 Pacudan, Jackelyn D. 9 1 168.61 93 Veronilla, Reynan, Sr. P. 9 2 168.61 94 Ucab, Talitha Zorahaida P. 9 3 168.61 95 Abella, Christine R. 9 4 168.61 96 Ole, Mary Ann C. 9 5 168.61 97 Udtohan, Jeanalin 9 6 168.61 98 Alberca, Ruel G. 9 7 168.61 99 Jandayan, Lawrence S. 9 8 168.61 100 Jandayan, Epifanio Jr. S. 9 9 168.61 101 Hamo, Renante C. 9 10 168.61 102 Vicente, Kim P. 9 11 156.80 103 Dumaloan, Liezel K. 9 12 155.12 104 Ratunil, Kate C. 9 13 160.18 105 Morales, Judie M. 9 14 180.41 106 Abregana, Jay E. 9 15 178.72 107 Magallanes, Jim B. 10 1 207.38 108 Balabat, Porferio Jr. G. 10 2 168.61 109 Bernaldez, Frederick T. 10 3 168.61 110 Berongoy, Arnold B. 10 4 168.61 111 Yamut, Ian Joey R. 10 5 168.61 112 Valdueza, Juvelyn F. 10 6 168.61 113 Villavelez, Ryan L. 10 7 168.61 114 Amatong, Renato Q. 10 8 177.04 115 Gultiano, Cresenta A. 10 9 177.04 116 Saluta, Marina G. 10 10 177.04 117 Latip, Saripha M. 10 11 177.04 118 Gonzaga, Noah Jones P. 10 13 168.61 119 Taborada, Marlon D. 10 14 168.61 Footnotes 1. See Annex for the masterlist of qualified beneficiaries.