BIR Ruling No. 486-14

December 10, 2014 BIR RULING NO. 486-14 RA 7279; BIR Ruling No. 062-2014 LAK-K Builders Co. Units 606 & 609 Jocfer Bldg. Commonwealth Avenue, Quezon City Attention: Michael Angelo F. Kallos Vice President/General Manager Gentlemen : This refers to your letter dated April 30, 2014 on behalf of LAK-K BUILDERS CO. requesting reconsideration of BIR Ruling No. 106-2014 dated March 28, 2014 on the portion thereof in which this Office ruled that the transfer by LAK-K BUILDERS CO. to Pandi Residences Homeowner's Association, Inc. of the 862 developed lots under Batch 02-2013 on the Thirty Six Thousand Eighty Eight (36,088) square meters portion of the subject real properties shall be subject to the payment of documentary stamp tax (DST) under Section 196 of the Tax Code of 1997, as amended. The pertinent portion of the aforesaid Ruling is quoted below, to wit: "It must be noted that the exemption from the documentary stamp tax of NHA, in connection with any of its socialized housing projects, extends to the other party (either seller or buyer) that deals or transacts with the NHA. It appearing, however, that the NHA is merely financing the sale which is actually between LAK-K BUILDERS CO. and Pandi Residences Homeowner's Association, Inc., the above provision granting DST exemption to parties transacting with the NHA does not apply. Accordingly, the transfer by LAK-K BUILDERS CO. to Pandi Residences Homeowner's Association, Inc. of the 862 developed lots under Batch 02-2013 on the Thirty Six Thousand Eighty Eight (36,088) square meters portion of the above-described properties shall be subject to the payment of documentary stamp tax under Section 196 of the Tax Code of 1997, as amended." Background The LAK-K BUILDERS CO., with Tax Identification Number 007-191-150-000, is a General Partnership duly registered with the Securities and Exchange Commission (SEC) bearing SEC Registration No. PG200818704. The company is a real property developer habitually engaged in the business of developing and constructing housing subdivisions. It owns three (3) parcels of land located at Brgy. Mapulang Lupa, Pandi, Bulacan, covered by Transfer Certificate of Title (TCT) Nos. 040-2013033904, 040-2013033905 and 040-2013033906 of the Registry of Deeds for Meycauayan, Bulacan, particularly described as follows: TAacHE TCT NO. 040-2013033904 1 "A PARCEL OF LAND (LOT 2661-B OF THE SUBD. PLAN PSD-03-094689, BEING A PORTION OF LOT 2661, S. M. DE PANDI EST. LRC REC. NO.) SITUATED IN THE BO. OF MAPULANG LUPA, MP. OF PANDI, PROV. OF BUL. . . . CONTAINING AN AREA OF TWENTY THOUSAND TWENTY SIX (20,026) SQ.M." TCT NO. 040-2013033905 2 "A PARCEL OF LAND (LOT 2661-A OF THE SUBD. PLAN PSD-03-094689, BEING A PORTION OF LOT 2661, S. M. DE PANDI EST. LRC REC. NO.) SITUATED IN THE BO. OF MAPULANG LUPA, MUN. OF PANDI, PROV. OF BUL. . . . CONTAINING AN AREA OF ELEVEN THOUSAND (11,000) SQ.M." TCT NO. 040-2013033906 3 "A PARCEL OF LAND (LOT 2660 OF THE STA. MARIA DE PANDI ESTATE, GLRO REC. NO. 8503) SITUATED IN THE MUN. OF BIGAA, PROV. OF BUL. . . . CONTAINING AN AREA OF TWENTY FIVE THOUSAND NINE HUNDRED TWENTY SIX (25,926) SQ.M." On September 19, 2013, a Contract Agreement 4 was entered into by and between LAK-K BUILDERS CO. and Pandi Residences Homeowner's Association, Inc. , a homeowner's organization registered with the Housing and Land Use Regulatory Board (HLURB) with Registration No. 20090, whereby LAK-K BUILDERS CO. has agreed to sell to Pandi Residences Homeowner's Association, Inc.'s individual members the developed lots, including the completed housing units thereon under the Community Initiative Approach Program (CIAP) of the National Housing Authority (NHA) (TIN 000-916-384-000) for Two Hundred Forty Thousand Pesos (P240,000) 5 for every developed lot and completed housing unit per family. ICAcaH On October 4, 2013, a Memorandum of Agreement 6 (MOA) was executed by and among LAK-K BUILDERS CO., as the landowner/developer/constructor, the members of Pandi Residences Homeowner's Association, Inc., as the beneficiaries, and the NHA, as the lead agency in the implementation of the National Resettlement Programs of the government for Fiscal Year (FY) 2013, to ensure the timely, peaceful and orderly relocation and resettlement of the informal settler families living in danger areas, affected by calamities and those affected by the clearing of waterways, esteros and infrastructure projects of the government in Metro Manila. Under the MOA, NHA shall finance the acquisition of 1,500 developed lots and the completed housing units by the members 7 of the Pandi Residences Homeowner's Association, Inc. through the CIAP under the National Resettlement Program of the government for FY 2013 in the amount not to exceed One Hundred Fifteen Thousand Pesos (P115,000.00) per lot per family and One Hundred Twenty Five Thousand Pesos (P125,000.00) per housing unit, respectively. On November 27, 2013, LAK-K BUILDERS CO. and the NHA executed a Deed of Absolute Sale whereby the former transferred and conveyed to the latter a portion of the above-described real properties, particularly an area measuring Thirty Six Thousand Eighty Eight (36,088) square meters, more or less, consisting of the Eight Hundred Sixty Two (862) developed lots under Batch 02-2013 for a total consideration of Ninety Nine Million One Hundred Thirty Thousand Pesos Only (P99,130,000.00). Issue Based on the foregoing facts, it is now requested that the transfer by LAK-K BUILDERS CO. in favor of the NHA of the Thirty Six Thousand Eighty Eight (36,088) square meters consisting of the Eight Hundred Sixty Two (862) developed lots under Batch 02-2013, be exempt from the DST imposed under Section 196 of the 1997 Tax Code, as amended. It is contended that the Deeds of Absolute Sale covering the transfer of the aforesaid properties are executed by and between LAK-K BUILDERS CO. and the NHA, and that Pandi Residences Homeowner's Association, Inc. is not a party thereto. Hence, the exemption from the payment of DST granted to NHA on sales transactions executed in its favor must also apply in this case. ITaESD In support of its request, LAK-K BUILDERS CO. submitted copies of Transfer Certificates of Title and Tax Declarations registered under the name of the NHA covering various real properties located in the Province of Bulacan. Based on the Tax Declarations, it is shown that the previous owner of the real properties is LAK-K BUILDERS CO. Ruling In reply, please be informed that under Revenue Memorandum Circular (RMC) No. 42-01 dated October 5, 2001, it is provided that: 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) . . . aSTcCE (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 It must be noted that the exemption from the documentary stamp tax of NHA, in connection with any of its socialized housing projects, 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 LAK-K BUILDERS CO. to NHA of the 862 developed lots under Batch 02-2013 on the Thirty Six Thousand Eighty Eight (36,088) square meters portion of the above-described properties is, likewise, exempt from the payment of DST imposed under Section 196 of the Tax Code of 1997, as amended. (BIR Ruling No. 062-2014 dated February 19, 2014) Wherefore, this ruling modifies BIR Ruling No. 106-2014 dated March 28, 2014 such that the transfer by LAK-K BUILDERS CO. to NHA of the 862 developed lots under Batch 02-2013 on the Thirty Six Thousand Eighty Eight (36,088) square meters portion of the above-described properties is exempt from DST imposed under Section 196 of 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 disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner Bureau of Internal Revenue Footnotes 1. Formerly, TCT No. T-349269 (M), under the name of Sps. Carlos G. Cruz and Florencia P. Landayan. 2. Formerly, TCT No. T-357714 (M) under the name of Domingo Ortega married to Crispina Capiral. 3. Formerly, TCT No. RT-30270 (T-18574) under the name of Filomeno De Jesus. 4. (Financing the Acquisition of Developed Lots and Completed Housing Units) in Pandi Residences, Brgy. Mapulang Lupa, Pandi, Bulacan. 5. P115,000.00 per developed lot and P125,000.00 per completed housing unit. 6. (For Financing the Acquisition and Developed Lots and Financing the Acquisition of Completed Housing Units) Pandi Residences Resettlement Project, Brgy. Mapulang Lupa, Pandi, Bulacan. 7. Composed of members/families living in danger areas affected by calamities and those affected by the clearing of waterways, esteros and infrastructure projects of the government in Metro Manila.