BIR Ruling No. 586-12

October 10, 2012 BIR RULING NO. 586-12 Section 20 of Republic Act No. 7279; BIR Ruling No. 130-10; BIR Ruling No. 021-11 Babak Homeowners Association, Inc. Sitio Kabukiran, Brgy. Pichon, Babak District Island Garden City of Samal, Davao Del Norte Attention: Mr. Benjamin Sabijon, Jr. President Gentlemen : This refers to your letters dated 12 March 2010 and 28 March 2011, respectively, received via indorsement from Revenue Region No. 19, Davao City dated August 17, 2011, requesting exemption from the payment of capital gains tax relative to the sale of parcels of land by Josephine Bastes in favor of BABAK HOMEOWNER'S ASSOCIATION, INC. (BHOAI) pursuant to Republic Act (R.A.) No. 7279 otherwise known as the "Urban Development and Housing Act of 1992." It is represented that Josephine Bastes, with Taxpayer's Identification No. 131-838-887, is the registered owner of several parcels of land located at Babak, Davao with an area of 5,789 sq.m. more or less and covered by Transfer of Certificate Title (TCT) Nos. T-164122; T-164125; T-164128 to T-164129; T-164131; T-164657 to T-164661; T-165589 to T-165590; T-166022 to T-166024; T-166026; T-166914 to T-166917; T-169354 to T-169360; T-169803; T-169805 to T-169809; T-176098 to 176104; T-177988 to T-177991; T-187960 to T-187961; T-190428 and 215945 issued by the Registry of Deeds for Davao; that BHOAI with Taxpayer's Identification No. 005-998-838-000, is a non-stock, non-profit organization duly registered with the Housing and Land Use Regulatory Board (HLURB) with Registration No. 01170 dated August 19, 2002; that on September 16, 2010, a Deed of Absolute Sale was executed by Josephine Bastes in favor of BHOAI under the Community Mortgage Program (CMP) of the Social Housing Finance Corporation (SHFC) for the sale of the portion of the above-described property with an aggregate area of 5,646.88 sq.m. at the agreed price of Two Million Two Hundred Fifty-Eight Thousand and Seven Hundred Fifty-Two Pesos (PhP2,258,752.00) wherein One Million Six Hundred Ninety-Four Thousand Sixty-Two Pesos and 40/100 (1,694,062.40) was paid by SHFC; that said purchase of the property covered by the above-enumerated Transfer Certificates of Title is certified by the SHFC as a CMP project and qualified for capital gains tax exemption under R.A. No. 7279; that the following individuals (collectively referred to as the "beneficiaries") are those who availed the CMP according to the Master-list of Beneficiaries. Lot Allocation BABAK HOMEOWNERS ASSOCIATION, INC. Brgy. Miranda (Pichon, Babak District, Island Garden City of Samal) GUIDE FOUNDATION, INC. (Originator) MASTERLIST OF BENEFICIARIES AND LOAN APPORTIONMENT Loan Lot Share of Ref. Allocation Lot Open Total Present Previous No. Name of Beneficiaries Blk. No. Lot No. Area Space Lot Area Title No. Title 1 Imperial, Zeny E. 1 2 110 5.59 115.59 T-164131 2 Pasaylo, Joan B. 1 4 110 5.59 115.59 T-165590 3 Laspona, Marilou J. 1 5 110 5.59 115.59 T-165589 4 Romero, Joel T. 1 6 110 5.59 115.59 T-164657 5 Aquino, Judelyn M. 1 7a 82 4.16 86.16 T-176104 6 Cortez, Tetchie M. 1 8b 82 4.16 86.16 T-176104 7 Tulo, Orlando B. 1 9c 83 4.22 87.22 T-176104 8 Brigoli, Alma M. 1 10d 83 4.22 87.22 T-176104 9 Morgadez, Ronie Rey S. 1 11 107 5.43 112.43 T-166917 10 Garrido, Oscar Jr. D. 2 2 120 6.09 126.09 T-164122 11 Sore, Rommel C. 2 4 120 6.09 126.09 T-164128 12 Sabijon, Benjamin Sr. S. 2 5 101 5.13 106.13 T-164129 13 Dinglasa, Jener S. 3 1 127 6.45 133.45 T-164125 14 Peder, Anita O. 3 4 108 5.49 113.49 T-166026 15 Aninion, Marjorie B. 4 2 100 5.08 105.08 T-164659 16 Aninion, Jocemar B. 4 4 100 5.08 105.08 T-164658 17 Enumerables, Juanice D. 5 2 117 5.94 122.94 T-169357 18 Gulmayo, Juan Jr. D. 5 3 104 5.29 109.29 T-169803 19 Millama, Delma M. 5 4 104 5.29 109.29 T-169358 20 Antalan, Rey P. 5 5 104 5.29 109.29 T-176098 21 Laspon, Rodina M. 5 6 104 5.29 109.29 T-164661 22 Lumatad, Cerelina M. 5 7 104 5.29 109.29 T-176099 23 Guerrero, Jenifer F. 5 9 102 5.18 107.18 T-176100 24 Asuero, Riza Edralin S. 6 3 100 5.08 105.08 T-166022 25 Guilaran, Mylene R. 6 4 100 5.08 105.08 T-166023 26 Sesbino, Rotchelle A. 6 5 100 5.08 105.08 169354 27 Sesbino, Sharon A. 6 6 100 5.08 105.08 T-169355 28 Avergonzado, Liza M. 6 7 100 5.08 105.08 T-169356 29 Senio, Baria T. 6 8 100 5.08 105.08 T-177991 30 Unabia, Zhesnan, Brian P. 6 9 100 5.08 105.08 T-169806 31 Mendoza, Arnulfa A. 6 10 88 4.47 92.47 T-177991 32 Dela Torre, Alberto N. 6 11 88 4.47 92.47 T-177991 33 Reyes, Jonathan T. 6 12 88 4.47 92.47 T-177991 34 Pelicano, Renefer L. 6 13 88 4.47 92.47 T-177991 35 Baran, Dante O. 6 14 97 4.93 101.93 T-169805 36 Roxas, Arlyn P. 7 2 102 5.18 107.18 T-169807 37 Sanchez, Raymond B. 7 3b 100 5.08 105.08 T-187960 T-177992 38 Mahinay, Pablo Jr. O. 7 4 100 5.08 105.08 T-169808 39 Oracion, Glenn C. 7 5c 100 5.08 105.08 T-187961 T-177992 40 Sisor, Helen L. 7 6 100 5.08 105.08 T-169809 41 Lugas, Joan F. 7 7 100 5.08 105.08 T-166914 42 Bordios, Ofelia A. 7 8 100 5.08 105.08 T-176101 43 Castilo, Arlene B. 7 9 100 5.08 105.08 T-166915 44 Simbajon, Jean P. 7 10 100 5.08 105.08 T-176103 45 Tabudin, Tata O. 7 11 100 5.08 105.08 T-166916 46 Formento, Joel C. 7 12 100 5.08 105.08 T-176103 47 Dacallos, Emma B. 8 1a 128 6.51 134.51 T-215945 T-177985 48 Baluarte, Lunerio M. 8 3b 100 5.08 105.08 T-190428 49 Cuberos, Daylinda N. 8 4 81 4.12 85.12 T-177988 50 Cuberos, Randy N. 8 5 81 4.12 85.12 T-177989 51 Cantos, Caridad V. 9 1a 85 4.11 89.11 T-177990 52 Cantos, Leid Vincent B. 9 2b 94 4.78 98.78 T-177990 53 Combista, Nene M. 9 3c 81 4.12 85.12 T-177990 54 Comapon, Glicerio N. 9 4d 81 4.12 85.12 T-177990 Total 5,374 272.88 5,646.88 ===== ====== ======= In support of your request, you attached copies of the following documents: 1. Written Application for Exemption indorsed to the Law Division by Revenue Region No. 19, Davao City; 2. Certified True Copy of the Deed of Sale; 3. Certified True Copies of the Transfer Certificates of Title; 4. Copies of Tax Declaration; 5. Certification from the SHFC that Babak Homeowners Association, Inc. is securing a housing loan under the Community Mortgage Program (CMP) for acquisition of the lots that its qualified member-beneficiaries occupy; IHEaAc a. Amended Certification reflecting the new titles (TCT Nos. T-215945; T-187960; and T-187961) issued in lieu of the cancelled TCT Nos. T-177985 and T-177992; b. Supplement to the Amended Certification indicating that the actual CMP area for Babak Homeowner's Association, Inc. have an aggregate total area of Five Thousand Six Hundred Forty-Six and 88/100 square meters 5,646.88 more or less, and that the difference of One Hundred Forty-Two and 12/100 square meters (142.12 sq.m.), more or less is the undivided share of Josephine S. Bastes in the open spaces covered by TCT Nos. T-164660, T-166024, T-169359 and T-169360. 6. Copy of the Certificate of Registration of BHOAI with the HLURB; 7. Certified True Copy of the Articles of Incorporation and By-Laws; 8. Certified True Copy and Soft copy of the Master-list of qualified beneficiaries; 9. BIR Certificate of Registration; and 10. Location Plan. In reply, please be informed that pursuant to Section 20 of R.A. No. 7279, pertinent portion of which reads: "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: ECTHIA xxx xxx xxx "(d) Exemption from the payment of the following: xxx xxx xxx (2) Capital gains tax on raw lands used for the project; xxx xxx xxx." "Sec. 32. Incentives . To encourage its wider implementation, participating in the CMP shall be granted with the following privileges or incentives: (a) . . . (b) Properties sold under the CMP shall be exempted from the capital gains tax the landowner is exempt from the payment of capital gains tax or expanded withholding tax on conveyance of the properties, corresponding to the portion thereof that will be sold to a community association under CMP. 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 properties, to the effect that the said properties shall be for socialized housing pursuant to R.A. 7279 (BIR Ruling No. 130-10 dated December 1, 2010) However, the documentary stamp tax is not one of the taxes covered by the tax exemption clause in Sec. 20 and 32 of R.A. 7279. Accordingly, you are liable to pay the documentary stamp tax on the documents conveying the properties imposed under Section 196 of the Tax Code of 1997, as amended, based on the actual consideration contracted to be paid for such realties or on its fair market value determined in accordance with Section 6 (E) of the said Code, whichever is higher (BIR Ruling No. 021-11 dated January 26, 2011). aDATHC 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 title in the name of the Homeowners Association 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 the RMO 15-2003. Notwithstanding the foregoing, the Bureau of Internal Revenue shall conduct verification and post-audit that the actual occupants of the properties transferred under the CMP are qualified beneficiaries and therefore, the sellers are entitled to exemption from capital gains tax or income tax under the Tax Code of 1997, as amended. 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