BIR Ruling No. 462-11

November 24, 2011 BIR RULING NO. 462-11 RA 7279; BIR Ruling No. 066-2011 Office of the Municipal Mayor Padada, Davao del Sur Attention: Pedro F. Caminero, Jr. Municipal Mayor Gentlemen : This refers to your letter dated June 23, 2011 requesting for a ruling that the sale by the Heirs of Cleta G. Hernandez of her property to the Local Government of Padada intended for the latter's socialized housing program is exempted from payment of capital gains tax and other fees allowed under R.A. No. 7279, otherwise known as the Urban Development and Housing Act of 1992. Documents submitted show that Heirs of Cleta G. Hernandez is the registered owner of a parcel of land covered by Transfer Certificate of Title (TCT) No. 144-2011000084 and designated as Lot No. 5359-A, Psd-11-094280 issued by the Registry of Deeds for the Digos, Davao del Sur. The aforestated lot is located at Brgy. San Isidro containing an area of forty thousand square meter (40,000 sq.m.) more or less. The Local Government of Padada, on the other hand, is a public entity created and existing under the laws of the Philippines and is desirous of purchasing the said property for socialized housing purposes, thus the Sangguniang Bayan adopted Resolution No. 080 Series of 2011. That a Deed of Absolute Sale was executed by and between Heirs of Cleta G. Hernandez, as represented by Pascuala H. Dizon and the Local Government of Padada transferring the subject realty in consideration for one million six hundred fifty thousand pesos (P1,650,000.00). On October 6, 2011, a Memorandum of Agreement was executed by Municipal Government of Padada, Davao del Sur and the National Housing Authority. The project shall cover the development of the Resettlement Site in San Isidro, Padada, Davao del Sur which shall be known as NHA-Hernadezville Housing Project, that will generate a total of 198 serviced lots. Under the MOA, The Local Government of Padada shall provide the land as the project site covered by above described Deed of Absolute Sale and other cost components not covered by the funds allocated by NHA while the NHA shall allocate twenty one million four hundred forty one thousand seven hundred twenty six and 92/100 (P21,441,726.92) to be sourced from the Resettlement Programs Funds to be utilized for the land development. prLL In reply, please be informed that pursuant to Section 20 of Republic Act (RA) No. 7279, pertinent portions of which state that: "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: xxx xxx xxx 2) Capital gains tax on raw lands use for the project; xxx xxx xxx" the owner of the raw land 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 parcel of land for use in the aforesaid socialized housing project. (BIR Ruling No. 066-2011 dated March 9, 2011) HSaIDc Upon application for exemption, a lien on the title of the land shall be annotated by the Register of Deeds having jurisdiction over the property, to the effect that the same is to be applied or is being applied to socialized housing project pursuant to RA 7279. However, the sale is subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997 based on the actual consideration of the property transferred, considering that one of the contracting parties is the Government. 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 land 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, including proof of payment of documentary stamp tax. On the other hand, the exemption granted under R.A. 7279 is without prejudice to the right of the Government to collect the proper amount of estate tax to the legal heirs pursuant to Section 84 of the Tax Code, as amended. 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. aAHDIc Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue