BIR Ruling No. 514-12

August 3, 2012 BIR RULING NO. 514-12 RA 7279; BIR Ruling No. 005-11; BIR Ruling No. 367-11 Jose C. Suico c/o Alfonso Homeowner's Association, Inc. 2556 Pasig Line St. Brgy. 783 Zone 085, Sta Ana, Manila Sir : This refers to your letter dated November 21, 2011 requesting for an exemption from the payment of capital gains tax and other taxes, if any relative to the transfer of title of land from Alfonso Homeowner's Association, Inc. in favor of Mr. Jose C. Suico pursuant to Republic Act 7279 otherwise known as the "Urban Development and Housing Act of 1992". TEHIaA It is represented that Alfonso Homeowner's Association, Inc. with Taxpayer's Identification No. 218-331-967-000, is the registered owner of the parcel of land located at Brgy. Sta. Ana, Manila City and covered by Transfer Certificate of Title (TCT) No. 290742 issued by the Registry of Deeds for the City of Manila; that it is a non-stock, non-profit organization duly registered with the Housing and Land Use Regulatory Board (HLURB); that the aforesaid lot was acquired through a loan under the Community Mortgage Program (CMP) of the Social Housing Finance Corporation (SHFC); that said project was taken-out/paid on June 9, 2003 in the amount of Php3,183,060.00; that the SHFC issued a Partial Release of Real Estate Mortgage constituted over the property described in Transfer Certificate of Title (TCT) No. 290742 dated July 26, 2011; and that Mr. Jose C. Suico is now in the process of transferring the purchased property to his name by virtue of a Deed of Absolute Sale dated October 17, 2011. It is further represented that Mr. Jose C. Suico substituted Ms. Laura B. Baquiran as member-beneficiary of the Association which was approved by SHFC last June 1, 2010. In support of your request, you have completely submitted on June 21, 2012 the following documents: 1) Written Application for Exemption filed with the Law Division; 2) Deed of Absolute Sale; 3) Certified True Copy of the Transfer Certificate of Title (TCT); 4) Certification from the Social Housing Finance Corporation (SHFC) that the property was acquired through CMP; 5) Certified true copy of the Articles of Incorporation of the community association; 6) Certification issued by SHFC on the approval of the substitution; 7) Partial Release of Real Estate Mortgage; ECDAcS 8) BIR Certificate of Registration of the Homeowner Association; and 9) Other pertinent documents . In reply, please be informed that the transfer by Alfonso Homeowner's Association, Inc. in favor of its individual\member-beneficiary of the said subdivided property is not subject to either the capital gains tax imposed under Section 27 (D) (5) of the Tax Code of 1997, as amended, or the creditable withholding tax imposed under Revenue Regulations No. 2-98, as amended, implementing Section 57 (B) of the same Code, considering that the said transfer of property is without any consideration since it is merely a formality to finally effect the transfer of the said property to its member-beneficiary who actually bought the same from the former owner through your Association. In other words, the association is in fact transferring the ownership of the property to its member-beneficiary who actually owns the same. Furthermore, the said transfer is not subject to the donor's tax imposed under Section 99 of the Tax Code of 1997, since there is no donative intent on the part of the Association to donate the said property to said member-beneficiary, considering that it could not donate property the ownership of which belongs to the member-beneficiary himself. (BIR Ruling No. 005-11 dated January 19, 2011 and BIR Ruling No. 367-11 dated October 5, 2011) It is noted that under Section 196 of the Tax Code of 1997, the deeds or documents subject to the documentary stamp tax imposed therein are those where the realty sold shall be granted, assigned, transferred, or otherwise conveyed to a purchaser or purchasers or to any other person or persons designated by such purchaser or purchasers, thereby excluding from its purview the instant case considering that the supposed purchaser is actually the owner thereof. Besides, no consideration is involved in said transaction upon which the tax imposed could be based. DCSTAH Accordingly, the transfer of title of the said property in your favor as member-beneficiary 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. (BIR Ruling No. 005-11 dated January 19, 2011 and BIR Ruling No. 367-11 dated October 5, 2011) It is, however, understood that the Certificate Authorizing Registration (CAR) shall only be issued after the submission of the requirements provided under RMO 15-2003 and after it is established upon proper verification by the Revenue District Officer (RDO) concerned that, considering the rules on valuation of real property, the actual selling price per sale transaction in this case does not exceed P400,000.00 for house and lot and P160,000.00 for lot only for each qualified beneficiaries. (BIR Ruling No. 005-11 dated January 19, 2011 and BIR Ruling No. 367-11 dated October 5, 2011) 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 of Internal Revenue