BIR Ruling No. 491-14

December 11, 2014 BIR RULING NO. 491-14 RA 7279; RR 11-97;BIR Ruling No. 066-2011; BIR Ruling No. 353-2013 Altissima Enterprises Old National Highway, Macabling Sta. Rosa, Laguna Attention: Roy M. Gonzales Proprietor Gentlemen : This refers to your letter dated December 18, 2013 requesting, on behalf of ALTISSIMA ENTERPRISES, tax exemption on the socialized housing project, Villa Santa Rosa Phase 1 , 1 consisting of 1,000 housing units located at Brgy. Caingin, Sta. Rosa City, Laguna, pursuant to Republic Act (RA) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". It is represented that the National Housing Authority (NHA),as the sole government agency engaged in direct shelter production to provide housing needs of the low and marginalized income families including those living in waterways and danger areas, those affected by calamities, and members of the AFP/PNP, BJMP and BFP, acquired four (4) parcels of land to be developed into a residential project under the Community Initiative Approach Program (CIAP) of the NHA. The subject properties are particularly described as follows: Transfer Certificate of Title No. 060-RT2014017619 (23573) "A PARCEL OF LAND (LOT NO. 1632 OF THE STA. ROSA ESTATE GLRO RECORD NO. 8375),SITUATED IN THE MUNICIPALITY OF STA. ROSA, PROVINCE OF LAGUNA, ISLAND OF LUZON. ...CONTAINING AN AREA OF TWENTY THOUSAND FOUR (20,004) SQUARE METERS." Transfer Certificate of Title No. 060-RT2014017528 (23572) "A PARCEL OF LAND (LOT NO. 1633, OF THE STA. ROSA ESTATE GLRO RECORD NO. 8375),SITUATED IN THE MUNICIPALITY OF STA. ROSA, PROVINCE OF LAGUNA, ISLAND OF LUZON. ...CONTAINING AN AREA OF FIFTEEN THOUSAND SIX HUNDRED FIFTY FIVE (15,655) SQUARE METERS." Transfer Certificate of Title No. EP-821 "A PARCEL OF LAND (Lot 1635, of the relocation plan, Rel-04-34280-001266, LRC No. 8375),situated in the Barrio of Caingin, Municipality of Sta. Rosa, Province of Laguna, Island of Luzon. ...containing an area of EIGHT THOUSAND EIGHT HUNDRED THIRTY FIVE (8,835) square meters." Transfer Certificate of Title No. T-468049 "A PARCEL OF LAND (Lot 1634, of the Sta. Rosa Estate, GLRO Rec. No. 8375) situated in the Mun. of Sta. Rosa, Prov. of Laguna, Island of Luzon. ...containing an area of NINETEEN THOUSAND THREE HUNDRED TEN (19,310) square meters." LLjur On various dates, Deeds of Absolute of Sale (DOAS) were executed by and between the respective landowners and the NHA whereby the former sold to the latter the subject properties to be utilized by the NHA for its socialized housing projects. Date of DOAS TCT of Property Contract Price January 21, 2014 EP-821 2 P3,534,000.00 January 17, 2014 T-468049 3 8,100,000.00 January 16, 2014 060-RT2014017619 13,980,400.00 (23573) 4 and 060- RT2014017528 (23572) 5 Total P25,614,400.00 ========== On October 25, 2013, a Contract Agreement 6 was executed by and between ALTISSIMA ENTERPRISES and Villa Santa Rosa Homeowners' Association, Inc. (VSRHOAI),a homeowner's organization registered with the Housing and Land Use Regulatory Board (HLURB),whereby ALTISSIMA ENTERPRISES has agreed to sell to VSRHOAI's individual members 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) 7 for every developed lot and completed housing unit per family. Moreover, on November 4, 2013, a Memorandum of Agreement 8 (MOA) was executed by and among ALTISSIMA ENTERPRISES, as the developer, VSRHOAI, as the beneficiaries, and the NHA, as the lead agency in the implementation of the Resettlement and Relocation Programs of the government and to ensure the timely, peaceful and orderly relocation and resettlement of the families affected by the calamities and those living in danger areas. Under the MOA, members 9 of the VSRHOAI shall be provided by the NHA with a financial grant for the acquisition of approximately 1,773 developed lots and financing of the acquisition of completed housing units 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 housing unit. To give effect to the Contract Agreement and MOA, on February 5, 2014, a Deed of Absolute Sale was executed by and between ALTISSIMA ENTERPRISES and NHA, whereby the former agreed to sell to NHA, 1,773 developed lots or parcels of land covering an area of Seventy Thousand Nine Hundred Twenty square meters (70,920 sq.m.) portion of the above-described properties for Two Hundred Three Million Eight Hundred Ninety Five Thousand Pesos (P203,895,000.00). A certification was issued by the NHA dated April 15, 2014, certifying that the housing project known as Villa Santa Rosa situated in Brgy. Caingin Sta. Rosa City, Laguna, consisting of an aggregate area of One Hundred Twenty Two Thousand Nine Hundred Forty Nine (122,949) square meters is a socialized housing project intended for families affected by the calamities and those living in danger areas qualified for housing assistance under the National Resettlement Program of the government; and that the said project consists of 1,773 units and has a total saleable area of 70,920 sq.m. and non-saleable area of 73,438 sq.m. In support of your above request, you submitted the following documents: DTEAHI 1) BIR Certificate of Registration; 2) Copy of HLURB Certificate of Registration of VSRHOAI; 3) Copies of the Deeds of Absolute Sale executed by the landowners and ALTISSIMA ENTERPRISES; 4) Notarized copy of Deed of Absolute Sale dated February 5, 2014 between ALTISSIMA ENTERPRISES and NHA; 5) Copy of the Memorandum of Agreement by and among ALTISSIMA ENTERPRISES, VSRHOAI and NHA; 6) Copy of Contract of Agreement between ALTISSIMA ENTERPRISES and VSRHOAI; 7) Copies of the Transfer Certificate of Titles; 8) Certification from the NHA that property is socialized housing project; and 9) Other pertinent documents. 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: 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" Sale by the Landowners to NHA The owners of the raw lands are exempt from the payment of capital gains tax or the withholding tax under Revenue Regulations No. 2-98, as amended, on their sale of the parcels of land which shall be utilized in the aforesaid socialized housing project, Villa Santa Rosa Phase 1. (BIR Ruling No. 066-2011 dated March 9, 2011) Accordingly, the sale by the landowners to NHA of the Sixty Three Thousand Eight Hundred Four square meters (63,804 sq.m.) area of the subject properties, on which the 1,000 socialized housing units shall be constructed, 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. CaHAcT Moreover, 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 sale by the landowners to NHA of the Sixty Three Thousand Eight Hundred Four square meters (63,804 sq.m.) area of the subject properties 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. Transaction between ALTISSIMA ENTERPRISES 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 pursuant to Section 20 of RA No. 7279. Such being the case, the sale of ALTISSIMA ENTERPRISES to NHA of the 1,000 developed lots or parcels of land on the Sixty Three Thousand Eight Hundred Four square meters (63,804 sq.m.) area of the subject properties, is exempt from the capital gains tax, project-related income taxes and consequently from withholding tax. Upon issuance of this letter of exemption, and upon registration of the documents of sale, a lien on the Certificates of Title of the land to be issued in the name of the NHA shall be caused to be annotated by they Register of Deeds having jurisdiction over the properties, to the effect that the said properties shall be used for socialized housing pursuant to R.A. No. 7279. (BIR Ruling No. 353-2013 dated September 20, 2013) Likewise, 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 ALTISSIMA ENTERPRISES to NHA of the 1,000 developed lots or parcels of land on the Sixty Three Thousand Eight Hundred Four square meters (63,804 sq.m.) area of the subject properties is 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) Furthermore, under 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. Thus, the sale by ALTISSIMA ENTERPRISES to NHA of the 1,000 developed lots or parcels of land on the Sixty Three Thousand Eight Hundred Four square meters (63,804 sq.m.) area of the subject properties is exempt from VAT. 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 ALTISSIMA ENTERPRISES must issue non-VAT official receipts on its gross receipts from the said socialized housing project. ADTEaI 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. Per Certification dated September 1, 2014 issued by Altissima Enterprises, the subject request is for the Phase 1 of Villa Santa Rosa Housing Project consisting of 1,000 units, more or less. 2. Registered under the name of Marcos Q. Jeremias. 3. Registered under the names of Liberato M. Alcarez, Reynaldo M. Alcarez, Lydia M. Alcarez, Adoracion Alcarez-San Pedro, Abelardo M. Alcarez, Concepcion A. Pantaleon and Inaki A. Deiparine. 4. Registered under the names of Spouses Jose Hermano and Florencia Lapinid. 5. Registered under the names of Spouses Jose Hermano and Florencia Lapinid. 6. (For the Acquisition of 1,773 Housing Units) Villa Santa Rosa, Barangay Caingin, Sta. Rosa, Laguna. 7. P115,000.00 per developed lot and P125,000.00 per completed housing unit. 8. For Financing the Acquisition and Developed Lots and Financing the Acquisition of Completed Housing Units for Families Affected by Calamities and those Living in Danger Areas) Villa Santa Rosa, Brgy. Caingin, Sta. Rosa City, Laguna. 9. Composed of members/families affected by the calamities.