BIR Ruling No. 539-12

August 30, 2012 BIR RULING NO. 539-12 RA No. 7279; BIR Ruling No. 130-10; BIR Ruling No. 040-10 Reform 168 Housing Movement Phase I Homeowners Association, Inc. Brgy. 168 Deparo, Caloocan City Attention: Teresita M. Dia Gentlemen : This refers to your letter dated August 4, 2011 requesting tax exemption from the payment of Capital Gains Tax and other taxes in accordance with Republic Act No. 7279, otherwise known as the Urban Development and Housing Act of 1992. It appears that Manuel E. Buaya with Tax Identification Number 143-406-549-000, is the registered owner of a parcel of land, identified as Lot 2 of the cons. Subd. Plan (LRA) Psd-32210, approved as a non subdivision project, being a portion of Lot 460-B-2, (LRC) Psd-45829 & Lot 460-B3-C, (LRC) Psd-274303, L.R.A. Rec. No. 6563 covered by Transfer Certificate of Title (TCT) No. C-343454 issued by the Registry of Deeds for the Kalookan City. The aforesaid property is situated at Brgy. Deparo, Caloocan City with an area of two thousand two hundred thirteen square meters (2,213 sq.m.),more or less. Reform 168 Housing Movement Phase I Homeowners Association, Inc. with Tax Identification Number 242-241-878-000, on the other hand, is a homeowner's organization registered with the Housing and Land Use Regulatory Board (HLURB).On May 10, 2011, the parties executed a Deed of Sale whereby the owner transfers and conveys two thousand one hundred twenty three square meters (2,123 sq.m.),more or less of the subject property to Reform 168 Housing Movement Phase I Homeowners Association, Inc. at an agreed price of Four Million Two Hundred Forty Six Thousand Pesos (P4,246,000.00).Pursuant to a certification issued by Social Housing Finance Corporation, two thousand one hundred twenty three square meters (2,123 sq.m.),more or less of the property covered by Transfer Certificate of Title (TCT) No. C-343454 is actually a CMP Project and shall be proportionately distributed to the association's qualified member-beneficiaries. 1 For this purpose, Reform 168 Housing Movement Phase I Homeowners Association, Inc. secured a housing loan under the Community Mortgage Program (CMP),a financing assistance program of the Social Housing Finance Corporation (SHFC) a subsidiary of the National Home Mortgage Finance Corporation (NHMFC). 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 Manuel E. Buaya to Reform 168 Housing Movement Phase I Homeowners Association, Inc., in so far as the two thousand one hundred twenty three square meters (2,123 sq.m.) portion thereof is concerned is exempt from the capital gains tax. Upon issuance of this letter of exemption, and upon registration of the documents of sale, a lien on the Certificate of Title of the land to be issued in the name of the Homeowners Association shall be caused to be annotated by the Register of Deeds having jurisdiction over the property, to the effect that the said property shall be used for socialized housing pursuant to R.A. No. 7279. (BIR Ruling No. 130-10 dated December 1, 2010) DITEAc However, the documentary stamp tax is not one of the taxes covered by the tax exemption clause in Sec. 20 of RA 7279. Accordingly, Manuel E. Buaya is liable to pay the documentary stamp tax on the document 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 Deeds 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 RMO 15-2003. (BIR Ruling No. 040-10 dated August 27, 2010) Notwithstanding the foregoing, the Bureau of Internal Revenue shall conduct verification and post-audit that the actual occupants of the property transferred under the CMP are qualified beneficiaries and therefore, the seller is entitled to exemption from capital gains tax or income tax imposed under 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 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 of Internal Revenue ATTACHMENT REFORM 168 HOUSING MOVEMENT PHASE I HOMEOWNERS ASSOCIATION, INC. Brgy. 168 Deparo, Caloocan City Name of Beneficiary Blk. No. Lot No. Total Area (sq.m.) 1 Laura R. Balagot 1 1 49.98389 2 Alvin I. Pineda 1 2 39.46097 3 Daniel I. Marte 1 3 39.46097 4 Emely D. Toribio 1 4 39.46097 5 Beatriz C. Casallo 1 5 39.46097 6 Emilen P. Malabug 1 6 39.46097 7 Edmundo A. Hernandez 1 7 39.46097 8 Nelia M. Bautista 1 8 63.13755 9 Ricky G. Postrado 1 9 39.46097 10 Tomas D. Manapat 1 10 39.46097 11 Arnel B. Habla 1 11 39.46097 12 Gina P. Aves 1 12 39.46097 13 Rommel C. Roxas 1 13 57.87608 14 Danny R. Arsenio 1 14 39.46097 15 Kerlyn I. Payonan 1 16 39.46097 16 Dindo M. Gadayan 1 17 39.46097 17 Judith Pantila 1 18 39.46097 18 Jose Ramer M. Patricio 1 19 51.29926 19 John Dennis R. Magboo 2 1 67.08364 20 Ma. Corazon Dimalanta 2 2 43.40706 21 Carling G. Alforque 2 3 48.66853 22 Cecilia R. Rollo 2 4 48.66853 23 Felicitas D. Padiernos 2 5 48.66853 24 Jennifer Cascara 2 6 48.66853 25 Daisy Rhey C. Betarmos 2 7 48.66853 26 Ma. Christina E. Romero 2 8 48.66853 27 Arwin T. Ullegue 2 9 48.66853 28 Remedios B. Benuyo 2 10 43.40706 29 Alicia R. Fremista 2 11 48.62268 30 Reynaldo D. Arorong 2 12 34.1995 31 Gregorio E. Ramos 2 13 48.66853 32 Evelenia B. Ramirez 2 14 73.66047 33 Jocelyn E. Nieto 3 1 59.19145 34 Linda R. Guisihan 3 2 39.46097 35 Jonas Anthony B. Teao 3 3 39.46097 36 Gil L. Bonayog 3 4 39.46097 37 Reynante Sagun 3 5 39.46097 38 Dionisio T. Malazarte 3 6 39.46097 39 Oliver T. Guiron 3 7 39.46097 40 Henry C. Durana 3 8 39.46097 41 Jomarey M. Mogate 3 9 39.46097 42 Jocelyn M. Escartin 3 10 39.46097 43 Alpio C. Fortunado Jr. 3 11 39.46097 44 Teresita M. Dia 3 12 39.46097 45 Jacquilou M. Dia 3 13 39.46097 46 Elson T. Uchi 3 14 39.46097 47 Annabelle B. Perez 3 15 76.2912 Footnotes 1. See Annex for the masterlist of qualified beneficiaries.