Sale of Property under CMP - Exempt from Capital Gains Tax

November 19, 1993 BIR RULING NO. 456-93 SALE OF PROPERTY UNDER CMP EXEMPT FROM CAPITAL GAINS TAX 21 (E) 395-93 456-93 Sto. Angel Norte Homeowners Association, Inc. Sta. Cruz, Laguna Attention: Mr . Teodoro Garcia Attorney-in-fact This refers to your request for a ruling that the sale of Messrs. Antonio Francisco, Avelino Francisco and Hector Francisco through their attorney-in-fact, Mr. Teodoro Garcia of their real properties located at Sta. Cruz, Laguna, to the Sto. Angel Norte Homeowners Association, Inc., a non-stock, non-profit community organization duly registered with the Securities and Exchange Commission (SEC) in accordance with the Community Mortgage Program (CMP) initiated by the National Housing Authority is exempt from capital gains tax pursuant to Section 32(a) and (b) of R.A. 7279 which was approved on March 24, 1992 and published in the March 28, 1992 issue of the Philippine Times Journal and Malaya , newspapers of general circulation. It appears that the Community Mortgage Program (CMP) is a mortgage financing program of the National Home Mortgage Finance Corporation (NHMFC) which assists legally organized associations of underprivileged and homeless citizens to purchase and develop a tract of land under the concept of community ownership; that through a Letter-Guaranty by said Government Financing Institution the landowner executed a Deed of Sale to the Association which stands as the borrower and debtor to the extent of the total amount paid by NHMFC to the landowner; that in the instant case, the property being sold to the Sto. Angel Norte Homeowners Association, Inc. is covered by TCT Nos. T-122228, T-1285437, T-128549, T-128550, T-128551 and T-128552; that the said transaction was certified by the National Housing Authority as an approved project under the Community Mortgage Program (CMP) of the government. cdti Field verification conducted in this case disclosed that the thirty-eight (38) registered members of Sto. Angel Norte Homeowners Association, Inc. are qualified beneficiaries of the socialized housing program of the government as certified by the local government unit of Sta. Cruz, Laguna; and, that all portions of the lots are occupied. In reply, please be informed that pursuant to Section 32 of R.A. No. 7279, pertinent portion of which reads: "Sec. 32. Incentives . To encourage wider implementation, participants in the CMP shall be granted with the following privileges or incentives: acd xxx xxx xxx (b) Properties sold under the CMP shall be exempted from the capital gains tax; and xxx xxx xxx the landowners who sell their property to the association pursuant to the Community Mortgage Program are exempt from the payment of capital gains tax and from the expanded withholding tax under Revenue Regulations No. 1-90. Such being the case, the sale to the Sto. Angel Norte Homeowners Association, Inc. is exempt from the capital gains tax and the expanded withholding 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 lands to be issued in the name of the Homeowners Association, Inc. 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 R.A. 7279. However, it is observed that documentary stamp tax is not one of the taxes covered by the tax exemption clause under Sections 20 and 32 of R.A. 7279. Such being the case, the landowners, Messrs. Antonio Francisco, Avelino Francisco and Hector Francisco are liable to pay the documentary stamp tax on the document conveying the property to the Association under the CMP as imposed under Sec. 196 of the Tax Code, as amended, based on the actual consideration paid by the association to the said landowners. cdt LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue