BIR Ruling No. 484-14

December 3, 2014 BIR RULING NO. 484-14 RA 7279; BIR Ruling No. 036-2014 J.C. Uyecio Construction and Development Company Divine Grace Subdivision, Borol 1st Balagtas, Bulacan Attention: James C. Uyecio Managing Partner Gentlemen : This refers to your letter dated July 2, 2014 requesting issuance of Certificate of Tax Exemption for the development and construction of socialized housing units located at Brgy. Real de Cacarong, Pandi, Bulacan pursuant to Republic Act (R.A.) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". Documents submitted show that J.C. Uyecio Construction and Development Company (TIN 007-544-374-000), is the registered owner a certain housing subdivision known as Logia de Cacarong situated at Brgy. Real de Cacarong, Pandi, Bulacan, covered by five (5) Transfer Certificates of Title (TCT), to wit: Lot TCT No. No. Tax Declaration No. Area (sq. m.) 040-2014010977 1 1-G 2014-16010-00389 49,541 040-2014010978 2 1-E 2014-16010-00390 3,481 040-2014010979 3 1-A 2014-16010-00387 180 040-2014010980 4 1-H 2014-16010-00388 10,000 040-2014010981 5 1-F 2014-16010-00391 6,420 total area 69,622 ===== all issued by the Registry of Deeds for the Province of Bulacan, Meycauayan Branch. On February 14, 2014, a Contract Agreement 6 was executed by and between J.C. Uyecio Construction and Development Company and Jordan Park Homes Homeowners Association, Inc., a homeowner's organization registered with the Housing and Land Use Regulatory Board (HLURB) with Certificate of Registration No. 20134, whereby former has offered to sell the developed lots and completed housing units under the Community Initiative Approach Program (CIAP) of the NHA for Two Hundred Forty Thousand Pesos (P240,000.00) for every developed lot and completed housing unit per family. Moreover, on March 13, 2014, a Memorandum of Agreement 7 (MOA) was executed by and among, J.C. Uyecio Construction and Development Company, as the landowner/developer/constructor, Jordan Park Homes Homeowners Association, Inc., as the beneficiary, and the NHA, as the lead agency in the implementation of the National Resettlement Programs of the government for FY 2014 and to ensure the timely, peaceful and orderly relocation and resettlement of the informal settler families (ISFs) along danger areas, those affected by calamities and clearing of waterways, esteros and infrastructure projects of the government in Metro Manila. DHSACT Under the MOA, members 8 of Jordan Park Homes Homeowners Association, Inc. shall be provided by the NHA with a financial grant for the acquisition of loftable housing units 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. On May 14, 2014, J.C. Uyecio Construction and Development Company and the NHA executed a Deed of Absolute Sale whereby the former, transferred and conveyed 1,000 developed lots under Batch 1-2014 with an aggregate area of Forty Thousand Six Hundred Twenty Four square meters (40,624 sq.m.) to NHA at an agreed price of One Hundred Fifteen Million Pesos (P115,000,000.00). In reply, please be informed that pursuant to Sections 19 and 20 of Republic Act (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: xxx xxx xxx "(d) Exemption from the payment of the following: (1) Project-related income taxes; (2) Capital Gains Tax; (3) Value-added tax for the project contractor concerned; " the landowner/developer of properties who sell its properties for use in a socialized housing project are exempt from the payment of the capital gains tax and project-related income taxes. Such being the case, the sale of 1,000 developed lot packages on the Forty Thousand Six Hundred Twenty Four square meters (40,624 sq.m.) portion of the subject properties by J.C. Uyecio Construction and Development Company to NHA is exempt from capital gains tax, project-related income taxes and consequently from withholding tax. (BIR Ruling No. 036-2014 dated January 29, 2014) 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: cIaHDA (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 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 of J.C. Uyecio Construction and Development Company to NHA of the sale of 1,000 developed lot packages on the Forty Thousand Six Hundred Twenty Four square meters (40,624 sq.m.) portion of the subject properties are likewise exempt from documentary stamp tax imposed under Section 196 of the Tax Code of 1997, as amended. (BIR Ruling No. 036-2014 dated January 29, 2014) 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. 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 requirements provided under RMO 15-2003. Moreover, J.C. Uyecio Construction and Development Company is likewise exempt from the payment of VAT on its gross receipts from the said project, involving the sale of 1,000 developed lot packages on the Forty Thousand Six Hundred Twenty Four square meters (40,624 sq.m.) portion of the subject properties. 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. It shall be understood that J.C. Uyecio Construction and Development Company 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 disclosed that the facts are different, then this ruling shall be considered null and void. aEcDTC Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner Bureau of Internal Revenue Footnotes 1. Formerly: TCT No. T-464954 (M). 2. Formerly: TCT No. T-464952 (M). 3. Formerly: TCT No. T-464948 (M). 4. Formerly: TCT No. T-464955 (M). 5. Formerly: TCT No. T-464953 (M). 6. For the acquisition of Developed Lots and Completed Housing Units (Logia de Cacarong Resettlement Project, Brgy. Real de Cacarong, Pandi, Bulacan). 7. For financing the acquisition of developed lots and financing the acquisition of completed housing units (Logia ng Kakarong Resettlement Project, Brgy. Real de Cacarong, Pandi, Bulacan). 8. Composed of members/families living in danger areas, those affected by calamities and clearing of waterways, esteros and infrastructure projects of the government in Metro Manila.