BIR Ruling No. 480-11

December 5, 2011 BIR RULING NO. 480-11 RA No. 7279; BIR Ruling No. 130-10; BIR Ruling No. 040-10 New Life Homes Homeowners' Association, Inc. Talon V, Las Pias City Attention: Mr. Pedro J. Cario, Jr. President Gentlemen : This refers to the letter of Ma. Ana R. Oliveros, President of Social Housing Finance Corporation (SHFC) dated May 30, 2011, requesting in effect, for a ruling that the sale of parcels of land by Zoroaster A. Libosada and the subsequent transfer of title from New Life Homes Homeowners' Association, Inc. to the 16 individual beneficiaries are exempt from the payment of capital gains tax pursuant to Republic Act (RA) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". It appears that Zoroaster A. Libosada with Tax Identification Number 214-423-415-000, is the registered owner of parcels of land covered by nine (9) Transfer Certificates of Titles, to wit: TCT No. Area (sq. m.) Tax Declaration No. T-87172 45 E-017-22317 T-87173 43 E-017-22318 T-87174 43 E-017-22319 T-87175 42 E-017-22320 T-87176 42 E-017-22321 T-87177 42 E-017-22322 T-87178 42 E-017-22323 T-87179 42 E-017-22324 T-87180 50 E-017-22325 issued by the Registry of Deeds for Las Pias City. The aforesaid property is situated at Blk. 3, Lot 10 Casava St. Golden Acres, Talon V, Las Pias City with a total area of three hundred ninety one (391) sq.m. New Life Homes Homeowners' Association, Inc., on the other hand, is a homeowner's organization registered with the Housing and Land Use Regulatory Board (HLURB) with Tax Identification No. 241-789-361-000. On May 16, 2011, the parties executed a Deed of Sale whereby the owner transfer and convey three hundred eighty one square meters (381 sq.m.) of the subject property to New Life Homes Homeowners' Association, Inc., that pursuant to a certification issued by SHFC, 381 sq.m. of the property covered by TCT No/s. T-87172 to T-87180 is actually a CMP project and shall be proportionately distributed to the association's qualified member-beneficiaries, at an agreed price of One Million One Hundred Forty Three Thousand Pesos (P1,143,000.00). For this purpose, New Life Homes Homeowners' Association, Inc. secured a housing loan under the Community Mortgage Program (CMP), a financing assistance program of the SHFC, a subsidiary of the National Home Mortgage Finance Corporation (NHMFC). SADECI 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" 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 of the aforestated property by the owner to New Life Homes Homeowners' Association, Inc., in so far as the three hundred eighty one square meter (381 sq.m.) portion thereof is concerned is exempt from the capital gains tax. (BIR Ruling No. 130-10 dated December 1, 2010) However, the documentary stamp tax is not one of the taxes covered by the tax exemption clause in Sec. 20 of RA 7279. Accordingly, Zoroaster A. Libosada is 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. 130-10 dated December 1, 2010) It is, however, understood that this ruling is never intended and shall not be construed as giving authority to the concerned Register of Deed to effect transfer of the land titles 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 RMO15-2003. (BIR Ruling No. 040-10 dated August 27, 2010) SCaITA Moreover, the transfer of the lots, comprising the three hundred eighty one square meter (381 sq.m.) out of the total three hundred ninety one square meter (391 sq.m.), from the said association to the individual members (see Annex for the masterlist of qualified beneficiaries) thereof is not subject to either the capital gains tax imposed under Section 27 (D) (5) of the Tax Code of 1997, or the creditable withholding tax imposed under Revenue Regulations No. 2-98, as amended, considering that the said transfer/transaction is merely a formality to finally effect transfer of titles of the real properties to the member-beneficiaries who actually bought the same. Such lack of consideration does not, likewise, render the transfer subject to the donor's tax imposed under Section 99 of the Tax Code of 1997, since there is no intention on the part of the association to donate said properties to the members considering that the members of the association could not donate properties the ownership of which belongs to themselves (member-beneficiaries). Furthermore, the deed to be executed by New Life Homes Homeowners' Association, Inc. to effect the aforesaid transfer in favor of its individual members is not subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. However, the notarial acknowledgment to said deed of conveyance is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the Tax Code of 1997. Finally, upon issuance of this letter of exemption, and upon registration of the document of sale, a lien on the Certificates of Title of the land to be issued in the name of the beneficiary association of the socialized housing program shall be caused to be annotated by the Register of Deeds having jurisdiction over the properties, to the effect, that the said properties shall be used for socialized housing pursuant to RA No. 7279. 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. SITCcE Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue ATTACHMENT New Life Homes Homeowners' Association, Inc. Talon V, Las Pias City Name of Beneficiary Lot Total Area No. (sq.m.) 1. Saraza, Elizabeth L. 1 23.81 2. Dellosa, Liberty B. 2 23.81 3. Cario, Jr., Pedro J. 3 23.81 4. Dellosa, Lizabeth B. 4 23.81 5. Verdida, Leonisa M. 5 23.81 6. Lebajo, Jerome A. 6 23.81 7. Teanila, Juan M. 7 23.81 8. Acosta, Lina N. 8 23.81 9. Teanila, Salvacion M. 9 23.81 10. Acosta, Ma. Vilma L. 10 23.81 11. Saraza, Noli C. 11 23.81 12. Magdaong, Ricky A. 12 23.81 13. Entes, Marilyn L. 13 23.81 14. Saraza, Joel C. 14 23.81 15. Eusebio, Rolly O. 15 23.81 16. Bognot, Eduardo D. 16 23.81