BIR Ruling No. 473-14

November 24, 2014 BIR RULING NO. 473-14 RA 7279; RR 11-97;BIR Ruling No. 066-2011; BIR Ruling No. 413-2011; BIR Ruling No. 353-2013 The One Dynamic Three Realty Development Corporation 39B Sct. Ybardolaza corner Sct. Rallos Brgy. Sacred Heart, Quezon City Attention: Leandro C. Nocum President Gentlemen : This refers to your letter dated December 9, 2013 requesting issuance of Certificate of Tax Exemption for the Hermosa Heights Resettlement Project, Hermosa, Bataan pursuant to Republic Act (R.A.) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". Documents submitted show that Eduardo C. Espina married to Efigen Gilok Espina, et al. 1 (hereinafter referred to as Landowners), are the absolute and registered owners of a parcel of land, identified as Lot 1 of the consolidation-subdivision plan Pcs-03-019206 being a portion of consolidated lots 1-33, 35, 36 block 1, block 2, lots 1-24 block 3; lots 1-7, block 4, lots 1-8 block 5, lots 1-9 block 6, lots 1-11 block 7, lots 1-12 block 8, lots 1-13 block 9, lots 1-6 block 10, lots 1-9 block 11, lots 1-10 block 12, lots 1-9, block 13, lots 1-11 block 14, lots 1-7 block 15, lots 1-10 block 16, lots 1-9 block 17, lots 1-8 block 18, lots 1-27 block 19, lots 1-14 block 20, lots 1-14 block 21, lots 150 block 22, block 23, lots 1-27 block 24, lots 1-26 block 25 roads lots 7-30, all of (LRC) Psd-150543 covered by Transfer Certificate of Title (TCT) No. 038-2013001159 issued by the Registry of Deeds for Balanga, Bataan, located at Brgy. Mabuco, Hermosa, Bataan with an aggregate area of Forty Thousand square meters (40,000sq.m.). On December 27, 2012, a Contract Agreement was executed by and between The One Dynamic Three Realty and Development Corp. (TIN 006-821-460-000) and Hermosa Heights Homeowners Association, Inc., (HHHOAI) a homeowner's organization registered with the Housing and Land Use Regulatory Board (HLURB) with Certificate of Registration No. 20061, whereby the former offers its services to the latter to undertake the construction of 500 housing units in the 4-hectare Hermosa Heights Resettlement Project for Two Hundred Forty Thousand Pesos (P240,000.00) 2 for every developed lot and completed housing unit per family, which shall be financed by the National Housing Authority (NHA) under the National Resettlement Program for FY 2013 through Community Initiative Approach Program (CIAP). On February 22, 2013, a Deed of Absolute of Sale was executed by and between the landowner and the NHA, whereby the landowner transferred and conveyed to NHA the above mentioned property for Eleven Million Four Hundred Thousand Pesos (P11,400,000.00). IScaAE Moreover, on March 23, 2013, a Memorandum of Agreement 3 (MOA) was executed by and among The One Dynamic Three Realty and Development Corp., HHHOAI, as the beneficiaries, and the NHA, as the lead agency in the implementation of the National Resettlement Programs of the government for FY 2013 and to ensure the timely, peaceful and orderly relocation and resettlement of the informal settler families along danger areas affected by the clearing of waterways and esteros in Bataan Province. Under the MOA, members 4 of the HHHOAI shall be provided by the NHA with a financial grant for the acquisition of additional 500 developed lots and financing of the acquisition of completed 500 loftable row-house units under Batch 1 through the CIAP in the amount not to exceed One Hundred Fifteen Thousand Pesos (P115,000.00) per lot and One Hundred Twenty Five Thousand Pesos (P125,000.00) per loftable housing units. To give effect to the Contract Agreement and MOA, on November 27, 2013, a Deed of` Absolute Sale was executed by and between The One Dynamic Three Realty and Development Corp. and NHA, whereby the former agreed to sell to the latter, 498 developed lots or parcels of land under Batch 01-2013 with an aggregate area of Twenty Thousand One Hundred Twenty Seven square meters (20,127 sq.m.) covered by TCT No. 038-2013001159 for Fifty Seven Million Two Hundred Seventy Thousand pesos (P57,270,000.00). In reply, please be informed that pursuant to Sections 19 and 20 RA No. 7279, pertinent portions of which state that: "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: cTCADI 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 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. xxx xxx xxx Sale by the Landowners to NHA 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) TAIEcS Accordingly, the sale by the landowners to NHA of the subject property covered TCT No. 038-2013001159 is exempt from the payment of capital gains tax imposed under Sec. 24 (D) of the Tax Code of 1997, as amended or creditable withholding tax under Revenue Regulations No. 2-98, as amended. 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 transfer by the landowners to NHA of the subject property, is, likewise, exempt from the payment of documentary stamp tax under Section 196 of the Tax Code of 1997, as amended. (BIR Ruling No. 353-2013 dated September 20, 2013) Upon application for exemption, a lien on the titles of the land shall be annotated by the Register of Deeds having jurisdiction over the properties, to the effect that the same is to be applied or is 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 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. Transaction between The One Dynamic Three Realty and Development Corp. and NHA The developer of properties who sells its properties for use in a socialized housing project are exempt from the payment of project-related income taxes. Such being the case, the sale of The One Dynamic Three Realty and Development Corp. to NHA of the 498 developed lots under Batch 01-2013, in so far as the aggregate area of Twenty Thousand One Hundred Twenty Seven square meters (20,127 sq.m.) portion of the subject property is concerned, is exempt from the capital gains tax, project-related income taxes and consequently from withholding tax. (BIR Ruling No. 353-2013 dated September 20, 2013) IcHSCT 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 transfer by The One Dynamic Three Realty and Development Corp. to NHA of the 498 developed lots under Batch 01-2013 on the Twenty Thousand One Hundred Twenty Seven square meters (20,127 sq.m.) portion of the subject property is concerned, is, likewise, exempt from the payment of documentary stamp tax under Section 196 of the Tax Code of 1997, as amended. (BIR Ruling No. 353-2013 dated September 20, 2013) 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 project concerned, involving 498 developed lots under Batch 01-2013 on the Twenty Thousand One Hundred Twenty Seven square meters (20,127 sq.m.) portion of the subject property. 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 The One Dynamic Three Realty and Development Corp. must issue non-VAT official receipts on its gross receipts from the said socialized housing project. 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 Bureau of Internal Revenue Footnotes 1. Manuel V. Estrella married to Lilian Estrella, Anita Cui Consunji, Leonardo Javier, Celestino Topacio, Arnulfo S. Montenegro married to Ma. Theresa C. Montenegro, Efren S. Rivera married to Patricia C.L. Chan, Jose Ma. C. Consunji married to Maria Luisa R. Consunji, Maria Teresa C. Consunji, Ma. Cristina Consunji-Teplitxky married to Bertrand Teplitxky, Cipriano Ma. C. Consunji married to Eloisa P. Consunji, Ana Maria Consunji Santos married to Luis S. Santos, Antonio Ma. C. Consonji and Carmelo C. Consunji. 2. P115,000.00 per developed lot and P125,000.00 per completed loftable housing unit. 3. For Financing the Acquisition of Developed Lots and Financing the Acquisition of Completed Housing Units (Hermosa Heights Resettlement Project, Hermosa, Bataan). 4. Composed of members/families living in danger areas affected by waterways and esteros within Hermosa, Bataan.