BIR Ruling No. 464-13

December 6, 2013 BIR RULING NO. 464-13 RA No. 7279; BIR Ruling No. 109-13 Pagsabungan Community Homeowners Association, Inc. Upper Hermag, Tabok, Mandaue City Attention: Dante Pradilla President Gentlemen : This refers to the letter of Ma. Ana R. Oliveros, President of Social Housing Finance Corporation (SHFC) dated September 4, 2013, endorsing the sale transaction between Sps. Camilo Tarona & Caridad B. Tarona and Pagsabungan Community 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 disclose that Sps. Camilo Tarona & Caridad B. Tarona (hereinafter referred to as Landowners) are the registered owners of a parcel of land, identified as Lot 885-A of the subdivision plan, Psd-07-035510 being a portion of Lot 885, II-5121 Amd. 2 covered by Transfer Certificate of Title (TCT) No. 38843 issued by the Registry of Deeds for the City of Mandaue. The aforesaid property is situated at Brgy. Tabok, Mandaue City with an area of One Thousand Two Hundred square meters (1,200 sq.m.), more or less. Pagsabungan Community Homeowners Association, Inc. (TIN 242-152-498-000), on the other hand, is a homeowner's organization duly registered with the Housing and Land Use Regulatory Board (HLURB). On March 28, 2011, the parties executed Deed of Absolute Sale, whereby the Landowners transferred and conveyed the subject property to Pagsabungan Community Homeowners Association, Inc. at an agreed price of Two Million Four Hundred Thousand Pesos (P2,400,000.00). Pursuant to the certification issued by SHFC, the property covered by TCT No. 38843 is actually a Community Mortgage Program (CMP) Project and shall be proportionately distributed to the association's qualified member-beneficiaries. 1 For this purpose, Pagsabungan Community Homeowners 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). In support of its request, Pagsabungan Community Homeowners Association, Inc. has completely submitted on October 22, 2013 the following documents: cETCID 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 Sections 20 and 32 of 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: (d) Exemption from the payment of the following: (2) Capital gains tax on raw lands used for the project; xxx xxx xxx 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" TAacCE 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 Pagsabungan Community Homeowners Association, Inc. of the property covered by TCT No. 38843 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 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 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. (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 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 Pagsabungan Community Homeowners Association, Inc. Upper Hermag, Tabok, Mandaue City Blk. Lot No. Total Area Name of Beneficiary No. (sq.m.) 1. Catayong, Romulo 01 01 45.0512 2. Pelayo, Saldo 01 02 40.9556 3. Retuerto, Luz 01 03 40.9556 4. Sabaricos, Leah 01 04 40.9556 5. Mamulang, Mateo 01 05 49.1468 6. Heramil, Emiliano 01 06 40.9556 7. Retuerto, Lezieda 01 07 40.9556 8. Decierdo, Agapito 01 08 40.9556 9. Albofera, Jeffrey 01 09 40.9556 10. Albofera, Janet 01 10 40.9556 11. Ylanan, Joy 01 11 40.9556 12. Mamulang, Marlone 01 12 40.9556 13. Maglasang, Janeth 01 13 34.1297 14. Rosell, Leo 01 14 34.1297 15. Gaviola, Wilson 01 17 36.8601 16. Satorre, Ruel G. 01 18 40.9556 17. Roble, Helen 01 19 40.9556 18. Ugnay, Jennifer 02 01 47.7816 19. Ho, Avelina 02 02 40.9556 20. Pradilla, Dante 02 03 40.9556 21. Pahulas, Virgilia R. 02 04 40.9556 22. Mendoza, Rosie R. 02 05 42.3208 23. Luchavez, Edelito 02 06 40.9556 24. Salentes, Marile 02 07 40.9556 25. Gajudo, Bernadeth S. 02 08 40.9556 26. Satorre, Danilo Jr. 02 09 40.9556 Footnotes 1. See Annex for the masterlist of qualified beneficiaries.