BIR Ruling No. 465-13

December 6, 2013 BIR RULING NO. 465-13 RA No. 7279; BIR Ruling No. 109-13 Samahang Magkakapitbahay ng San Antonio De Padua Homeowners' Association, Inc. Lot 1-E Blk. II, Senatorial St., Dolor Estate Batasan Hills, Quezon City Attention: Andres Viacrusis President Gentlemen : This refers to your letter July 26, 2013 requesting tax exemption from the payment of Capital Gains Tax and other taxes of the sale transaction between Rodolfo Acua Go married to Rosita Luy Go and Samahang Magkakapitbahay ng San Antonio De Padua Homeowners' Association, Inc. in accordance with the Republic Act No. 7279, otherwise known as the Urban Development and Housing Act of 1992. ATaDHC Documents submitted disclosed that Rodolfo Acua Go (married to Rosita Luy Go) (hereinafter referred to as landowner) is the registered owner of a parcel of land, identified as Lot 1-E of the subdn. Plan (LRC) Psd-12083, being a portion of Lot 1, described on plan Pcs-2874, LRC (GLRO) Rec. No. 1037 covered by Transfer Certificate of Title (TCT) No. RT-129524 (234011) issued by the Registry of Deeds for the Quezon City. The aforesaid property is situated at Batasan, Quezon City with an area of Two Thousand Five Hundred Thirty Five square meters (2,535 sq.m.), more or less. Samahang Magkakapitbahay ng San Antonio De Padua Homeowners' Association, Inc. (TIN 409-420-198-000), on the other hand, is a homeowner's organization duly registered with the Housing and Land Use Regulatory Board (HLURB). On June 7, 2013, the landowner and Samahang Magkakapitbahay ng San Antonio De Padua Homeowners' Association, Inc. executed a Deed of Absolute Sale, whereby the landowner transferred and conveyed One Thousand Nine Hundred Fifty Six square meters (1,956 sq.m.) portion of the subject property to the latter at an agreed price of Two Million Nine Hundred Thirty Four Thousand Pesos (P2,934,000.00). Pursuant to the Certification dated February 12, 2013 issued by Social Housing Finance Corporation (SHFC), One Thousand Nine Hundred Fifty Six square meters (1,956 sq.m.) out of the Two Thousand Five Hundred Thirty Five square meters (2,535 sq.m.) covered by TCT No. RT-129524 (234011) is actually a Community Mortgage Program (CMP) Project and shall be proportionately distributed to the association's qualified member-beneficiaries. 1 For this purpose, Samahang Magkakapitbahay ng San Antonio De Padua 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, Samahang Magkakapitbahay ng San Antonio De Padua Homeowners' Association, Inc. has completely submitted on October 10, 2013 the following documents: 1) Letter application for tax exemption; 2) Certification of the President of the SHFC that the subject property qualifies and is actually a CMP project; 4) n 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: SEcITC "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" the landowner who sold his property for use in a socialized housing project is exempt from the payment of capital gains tax. Such being the case, the sale by the landowner to Samahang Magkakapitbahay ng San Antonio De Padua Homeowners' Association, Inc. of One Thousand Nine Hundred Fifty Six square meters (1,956 sq.m.) portion of the properties covered by TCT No. RT-129524 (234011) is exempt from the capital gains tax. (BIR Ruling No. 109-13 dated March 21, 2013) 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 landowner is liable to pay the documentary stamp tax on the document 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. HTDcCE Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue ANNEX Samahang Magkakapitbahay ng San Antonio De Padua Homeowners' Association, Inc. Lot 1-E Blk. II, Senatorial St., Dolor Estate Batasan Hills, Quezon City Name of Beneficiary Blk. Lot Total Area No. No. (sq.m.) 1. Juanitas, Mesa S. 2 2 33 2. Maglente, George P. 2 3 33 3. Maglente, Jack P. 2 4 33 4. Jacosalem, Nenita V. 2 5 33 5. Lapera, Julie Ann P. 2 6 33 6. Lapera, Jeofrey L. 2 7 33 7. Arizo, Jocelyn C. 2 8 33 8. Rama, Jovelyn C. 2 9 33 9. Jacosalem, Jamie Jr. C. 2 10 33 10. Furigay, Mark Anthony L. 2 11 33 11. Darantinao, Dechie A. 3 1 33 12. De Vera, Grace D. 3 2 33 13. Celso, Reynal G. 3 3 33 14. Figurasion, Jino H. 3 4 33 15. Celso, Aris F. 3 5 33 16. Martines, Rodolfo R. 3 6 33 17. Saturinio, Orlando A. 3 7 33 18. Celso, Kyrene G. 3 8 33 19. Gutierrez, Benjamin V. 3 9 33 20. Dela Torre, Mario L. 3 10 33 21. Serano, Edna B. 3 11 33 22. Celso, Melisa F. 3 12 33 23. Tan, Jennifer D. 3 13 33 24. Matuloy, Rowena S. 3 14 33 25. Abesamis, Rena Rose B. 3 15 33 26. Bijar, Michael J. 3 16 33 27. Nacepo, Loremon D. 3 17 33 28. Jordan, Sally M. 3 18 33 29. Portes, Daisy 3 19 33 30. Viacrusis, Andres G. 3 20 33 31. Cabaltiera, Emly S. 4 1 33 32. Bobis, Edgardo G. 4 2 33 33. Maceda, Mabel B. 4 3 33 34. Maceda, Marlan B. 4 4 33 35. Milliona, Ma. Lourdes Y. 4 5 33 36. Jabal, Ma. Angelita Y. 4 6 33 37. Maceda, Goronio G. 4 7 33 38. Gonzales, Genisis G. 4 8 33 39. Bona, Wilfreda M. 4 9 33 40. Cuao, Vertchille M. 4 10 33 41. Pardo, Nicasio M. Jr. 4 12 33 42. Dioneda, Dorothy B. 4 13 33 Footnotes 1. See Annex for the masterlist of qualified beneficiaries. n Note from the Publisher: Copied verbatim from the official copy. Missing paragraph 3.