BIR Ruling No. 453-14

November 10, 2014 BIR RULING NO. 453-14 RA No. 7279; BIR Ruling No. 418-13; BIR Ruling No. 416-13; BIR Ruling No. 353-13 Dowal Realty and Management Systems Corporation DOWAL Business Center, Unit B-1 Verde Royale, Pluto St., Brgy. Bahay Toro, Quezon City Attention: Archt. Domingo R. Tapay Chairman/CEO Gentlemen : This refers to your letter dated June 10, 2014, requesting Certificate of Tax Exemption for the Graceville Garden Village Housing Project in Barangay Graceville, San Jose Del Monte City, Bulacan, pursuant to Republic Act (R.A.) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". The Urban Triangle Development Commission was created pursuant to Executive Orders 620 and 620A primarily tasked to oversee the preparation of the Master Development Plan for the 250 hectare area of the Quezon City Central Business District to transform said area. It included National Housing Authority's (NHA) 30 hectare North Triangle Property which is presently occupied by some two thousand two hundred (2,200) informal settler families qualified to avail of government housing assistance. SRCC Multi-Purpose Cooperative (COOPERATIVE) is composed of qualified occupant-informal settler families who are among the beneficiaries of government housing assistance; the COOPERATIVE submitted to NHA the proposal for the development of a property in Barangay Graceville, San Jose Del Monte City, Bulacan; the proposal included the acquisition of the property, the development of the land, and the construction of the individual housing units. Documents submitted show that R.M. Tiosejo Developers, Inc. (TIN 240-598-931) is a duly registered domestic corporation; that it is the registered owner of parcels of land covered by four (4) Transfer Certificates of Title (TCT), to wit: HTASIa TCT No. Area (Sq.M.) Tax Declaration No. T-70.491 (M) (lot A) 50,209 99-21012-11060 T-70.492 (M) (lot B) 8,240 99-21012-11061 T-70.493 (M) (lot C) 2,097 99-21012-11062 T-70.494 (M) (lot D) 2,195 99-21012-11063 Total: 62,741 ====== issued by the Registry of Deeds for Meycauayan, Bulacan. On July 5, 2013, a Deed of Absolute Sale was executed by and between R.M. Tiosejo Developers, Inc. and NHA whereby the LANDOWNER/VENDOR has offered to sell the "Property" with an aggregate area of Sixty Two Thousand Seven Hundred Forty One (62,741) square meters, more or less, together with all the improvements existing thereon, if any, as a resettlement site to the qualified members of the COOPERATIVE; NHA/VENDEE offered to buy said properties for the total purchase price of Thirty Three Million Eight Hundred Twenty Two Thousand Three Hundred Pesos (Php33,822,300.00). Initially, Ninety Percent (90%) of the total price or Thirty Million Four Hundred Forty Thousand Seventy Pesos (Php30,440,070.00) was paid to the LANDOWNER/VENDOR and the remaining Ten Percent (10%) or Three Million Three Hundred Eighty Two Thousand Two Hundred Thirty Pesos (Php3,382,230.00) shall be released upon transfer of the titles in the name of NHA. On October 21, 2013, a Memorandum of Agreement (MOA) was executed by and among DOWAL Realty and Management Systems Corporation (DEVELOPER), SRCC Multi-purpose Cooperative (COOPERATIVE) and National Housing Authority, to relocate informal settler families; the DEVELOPER has offered its services to the COOPERATIVE to fully develop Seven Hundred Forty Five (745) service homelots in the said project and undertake the construction of the Seven Hundred Forty Five (745) completed housing unit(s) based on approved land development, building plans and specifications prescribed by NHA; the NHA shall finance the acquisition by the member/beneficiaries of the land, the corresponding land development, and acquisition of completed housing units with a maximum amount of Php394,191.43 per qualified applicant for a 40.0 square meters housing unit utilizing portion of the allocated Php450 Million funds approved by Department of Budget and Management released in favor of the NHA on November 21, 2011. CADSHI On June 4, 2014, a Certification was issued by the National Housing Authority, NHA Region III Office, San Fernando City, Pampanga, certifying that a Memorandum of Agreement entered into by and among the NHA, DOWAL Realty and Management Systems Corporation and the SRCC Multi-Purpose Cooperative of the Graceville Garden Village Housing Project Site in Brgy. Graceville, San Jose del Monte City, Bulacan, covering the acquisition of developed lots and completed housing units is being implemented by the NHA under the National Resettlement Program of the government for FY 2013 and it is further certified that the above-mentioned Graceville Garden Village Housing Project with a house and lot package amounting to Php394,191.43/unit inclusive of rawland cost is a socialized housing project intended for the informal settler families (ISFs) affected by the clearing of NHA's North Triangle property in Quezon City who are qualified for housing assistance under Republic Act No. 7279. On August 5, 2014, a Certification was also issued by the National Housing Authority-Northern and Central Luzon Management Office, certifying that under a Deed of Absolute Sale dated July 5, 2013 entered into by and between the NHA and R.M. Tiosejo Developers, Inc. covering the acquisition of 62,741 square meter property located in Brgy. Graceville, San Jose del Monte City, Bulacan, known as the "Graceville Garden Village Housing Project" is being developed by the NHA under the National Resettlement Program of the government and it is further certified that it is a socialized housing project intended for 745 families who are qualified for housing assistance under Republic Act No. 7279. In support of your above request, you submitted the following documents: 1) Certified true copy of the Memorandum of Agreement executed by and among the National Housing Authority, R.M. Tiosejo Developers, Inc., and SRCC Multi-Purpose Cooperative dated July 5, 2013; 2) Certified true copy of the Deed of Absolute Sale executed by and between R.M. Tiosejo Developers, Inc. and National Housing Authority dated July 5, 2013; 3) Certified true copy of the Memorandum of Agreement executed by and among DOWAL Realty and Management Systems Corporation, SRCC Multi-purpose Cooperative, and National Housing Authority dated October 21, 2013; 4) Certified true copy of the Amendment to the Memorandum of Agreement executed by and among DOWAL Realty and Management Systems Corporation, SRCC Multi-purpose Cooperative, and National Housing Authority dated April 30, 2014; aTEHCc 5) Certified true copies of the Transfer Certificates of Title Nos. T-70.491 (M), T-70.492 (M), T-70.493 (M), and T-70.494 (M) of the Registry of Deeds of Meycauayan, Bulacan and the Tax Declarations issued by the City Assessor's Office of San Jose Del Monte City, Bulacan; 6) Certifications issued by the National Housing Authority, NHA Region III Office, San Fernando City, Pampanga dated June 4, 2014 and by the NHA-Northern and Central Luzon Management Office dated August 5, 2014, respectively, certifying that the "Graceville Garden Village Housing Project" in Brgy. Graceville, San Jose del Monte City, Bulacan, is a socialized housing project under Republic Act No. 7279; 7) Certified true copies of SRCC Multi-Purpose Cooperative's Certificate of Registration, Articles of Cooperation, and By-Laws with the Cooperative Development Authority (CDA); 8) Certified true copy of SRCC Multi-Purpose Cooperative's Certificate of Registration with the BIR; 9) Certified true copy of R.M. TIOSEJO DEVELOPERS, INC.'s Articles of Incorporation with the Securities and Exchange Commission (SEC); 10) Certified true copies of DOWAL Realty and Management systems Corporation's Certificate of Incorporation, Articles of Incorporation, and By-Laws with the SEC; 11) Certified true copy of DOWAL Realty and Management systems Corporation's Certificate of Registration with the BIR; 12) Original copy of the Development Permit issued by the Office of the City Mayor, San Jose del Monte City, Bulacan; 13) Original copy of Environmental Compliance Certificate issued by the Regional Director, Department of Environment and Natural Resources, Environmental Management Bureau, Regional Office No. III, San Fernando City, Pampanga, granted to DOWAL Realty and Management Systems Corporation. In reply, please be informed that pursuant to Sections 19 and 20 of Republic Act (RA) No. 7279, pertinent portions of which state that: TEHIaD "Sec. 19. Incentives for the National Housing Authority. The National Housing Authority, being the primary government agency in charge of providing housing for the underprivileged and homeless, shall be exempted from the payment of all fees and charges of any kind, whether local or national, such as income and realty taxes. All documents or contracts executed by and in favor of the National Housing Authority shall also be exempt from the payment of documentary stamp tax and registration fees, including fees required for the issuance of transfer certificates of title. "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: xxx xxx xxx (d) Exemption from the payment of the following: (1) Project-related income taxes; (2) Capital gains tax on raw lands used for the project; (3) Value-Added Tax for the project contractor concerned;" xxx xxx xxx" Moreover, pertinent portions of Revenue Memorandum Circular (RMC) No. 42-01 dated October 5, 2001, provide, viz. : xxx xxx xxx A. "National Housing Authority (NHA)" The NHA, being the primary government agency in charge of providing housing for the underprivileged and homeless citizens shall be exempted from the payment of the following national internal revenue taxes: (1) . . . (2) Documentary stamp tax on sales transactions executed by and in favor of the NHA in connection with socialized housing projects. Since Section 19 of R.A. 7279 exempts "all documents or contracts executed by and in favor of the NHA," the exemption from documentary stamp tax extends to the other party (either seller or buyer) that is dealing or transacting with the NHA. aHATDI xxx xxx xxx Sale by the Landowner to NHA The owner of the raw lands is exempt from the payment of Capital Gains Tax or the Withholding Tax under Revenue Regulations No. 2-98, as amended, on the conveyance of the parcels of land which shall be utilized in the aforesaid socialized housing project, Graceville Garden Village. (BIR Ruling No. 418-13 dated November 13, 2013) Accordingly, the sale by R.M. Tiosejo Developers, Inc. to NHA of the aggregate area of Sixty Two Thousand Seven Hundred Forty One (62,741) square meters, more or less, on which the Seven Hundred Forty Five (745) housing units shall be constructed for the qualified members/beneficiaries of the COOPERATIVE, is exempt from the payment of capital gains tax imposed under Sec. 24 (D) of the Tax Code of 1997, as amended, or creditable tax under Revenue Regulations No. 2-98, as amended. Moreover, it must be noted that the exemption from documentary stamp tax of NHA in connection with any of its socialized housing project extends to the other party (either seller or buyer) that deals or transacts with the NHA. Consequently, since NHA is a party to the sale, no documentary stamp tax shall be due on such sale, either on NHA or the party with which NHA is transacting. Accordingly, the sale by the landowner to NHA of the Sixty Two Thousand Seven Hundred Forty One (62,741) square meters, more or less, covered by Transfer Certificates of Title Nos. T-70.491 (M), T-70.492 (M), T-70.493 (M), and T-70.494 (M) of the Registry of Deeds of Meycauayan, Bulacan, is likewise exempt from documentary stamp tax imposed under Section 196 of the Tax Code of 1997, as amended. (BIR Ruling No. 416-13 dated November 13, 2013) Transaction between the developer/builder and NHA The developer of the homelots/housing units in a socialized housing project is exempt from the payment of project-related income taxes pursuant to Section 20 of RA No. 7279. HSIaAT Such being the case, DOWAL Realty and Management Systems Corporation is exempt from project-related income taxes and consequently from withholding tax on the sale of Seven Hundred Forty Five (745) completed housing units on the Sixty Two Thousand Seven Hundred Forty One (62,741) square meters to the qualified members/beneficiaries of the COOPERATIVE (maximum amount of Php394,191.43 per qualified applicant for a 40.0 sq.m. average lot size). Pursuant to Section 20 of RA 7279, a project contractor of a socialized housing project shall also be exempt from the payment of Value-Added Tax (VAT) on the sale of Seven Hundred Forty Five (745) completed housing units on the Sixty Two Thousand Seven Hundred Forty One (62,741) square meters. However, its purchases of goods/articles shall be subject to VAT, even if the said purchases are to be used for the socialized housing project, since VAT is an indirect tax which can be passed on by the seller of the goods/services. Moreover, it shall be understood that DOWAL Realty and Management Systems Corporation must issue non-VAT official receipts on its gross receipts from the said socialized housing project. (BIR Ruling No. 353-2013 dated September 20, 2013) Upon application for exemption, a lien on the titles of the lands shall be annotated by the Register of Deeds having jurisdiction over the properties, to the effect that the same are to be applied or are being applied to socialized housing project pursuant to RA 7279. Please take note 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 lands 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) after the submission of the requirement provided under RMO 15-2003. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner Bureau of Internal Revenue