BIR Ruling No. 613-12

November 8, 2012 BIR RULING NO. 613-12 Section 20 of Republic Act No. 7279; BIR Ruling No. 066-2011 dated March 9, 2011 Office of the Provincial Governor Government Center, Mankilam Tagum City, Davao del Norte Attention: Atty. Jennifer B. Namoc Provincial Legal Officer OIC-Provincial Administrator Gentlemen : This refers to your letter dated 4 June 2010 requesting for a ruling that the acquisition of real properties located at Barangay Cuambogan, Tagum City, Davao del Norte, for the benefit of identified beneficiaries, 1 under the Socialized Housing Project, as approved by the Sangguniang Panlalawigan of the Province of Davao del Norte, is exempt from capital gains tax. HDcaAI It is represented that Mr. Hermenegildo C. Aguinaldo, with TIN 921-512-783, is the registered owner of a parcel of land covered by Original Certificate of Title No. (P-18152) P-6907 issued by the Registry of Deeds for the Province of Davao, with an area of 68,319 square meters. To implement the Socialized Housing Project, the PROVINCIAL GOVERNMENT OF DAVAO DEL NORTE (PROVINCE for brevity), with TIN 000-579-660-000, sought the assistance of the 1st CONGRESSIONAL DISTRICT OFFICE, DAVAO DEL NORTE (DISTRICT for brevity) to allocate funds for the acquisition of the parcel of land owned by Mr. Herminigildo C. Aguinaldo. The DISTRICT then endorsed the identified beneficiaries of the Socialized Housing Project and recommended the release of Six Million One Hundred Eighteen Thousand Four Hundred Fifty Pesos (Php6,118,450.00) from its Local Housing Fund (LHF) to the NATIONAL HOUSING AUTHORITY (NHA for brevity). Meanwhile, the Sangguniang Panlalawigan of Davao del Norte passed Resolution No. 485 authorizing Gov. Rodolfo P. Del Rosario to enter into a Memorandum of Agreement for the acquisition of the subject lot, with a total land area of 47,065 square meters. The NHA funded the purchase of subject lot for Six Million One Hundred Eighteen Thousand Four Hundred Fifty Pesos (Php6,118,450.00). NHA shall also provide technical assistance during implementation on beneficiary selection, relocation procedures and other areas where assistance is required, and shall assist the Province in the formulation of its Housing Program. On February 1, 2010, a Deed of Absolute Sale over the subject parcel of land was entered into by the PROVINCE, as vendee, duly represented by Gov. Rodolfo P. Del Rosario, and Hermenegildo C. Aguinaldo, as vendor. 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: EIAHcC 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." the owner of the raw land is exempt from the payment of capital gains tax or withholding tax under Revenue Regulations No. 2-98, as amended, on the conveyance of the parcel of land for use in the aforesaid socialized housing project. (BIR Ruling No. 066-2011 dated March 9, 2011) It is, however, understood that the Certificate Authorizing Registration (CAR) shall only be issued after the submission of the requirements provided under Revenue Memorandum Order No. 15-2003. However, the documentary stamp tax is not one of the taxes covered by the tax exemption clause in Sec. 20 of R.A. 7279. Accordingly, you are liable to pay the documentary stamp tax on the documents conveying the property imposed under Section 196 of the Tax Code of 1997, as amended, which should be based on the actual consideration since one of the contracting parties is the Government. Moreover, upon issuance of this letter of exemption, and upon registration of the document of sale, a lien on the Certificate of Title of the land to be issued in the name of the Province 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. 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 Footnotes 1. Paragraph 1, Article II (Project Beneficiary), Memorandum of Agreement dated October 13, 2009.