BIR Ruling No. 619-12

November 16, 2012 BIR RULING NO. 619-12 R.A. 7279; BIR Ruling 30-2012 Casili Estates Homeowners Association, Inc. Sitio Bato, Upper Casili, Consolacion, Cebu Attention: Mr. Gaudencio M. Daniel HOA President Gentlemen : This refers to your letter dated June 29, 2011 requesting exemption from the payment of capital gains tax on the sale of a parcel of land executed by Delia Alivio, Edgar Alivio, Lucia Becera, Romeo Alivio, Alma Alivio, Teodorico Alivio, Aurelio Alivio, Laura Alivio and Emediorica Alivio Morrisseau (hereinafter, the " Sellers ") in favor of the CASILI ESTATES HOMEOWNERS ASSOCIATION, INC. (the "Association" ), as well as exemption from capital gains tax on the subsequent transfer of the said lot to the member-beneficiaries of the Association, pursuant to Republic Act 7279 otherwise known as the "Urban Development and Housing Act of 1992". CTHDcE Documents submitted show that the sellers are the registered owners of a parcel of land covered by Transfer Certificate of Title (TCT) No. MR-6170 T(63866), issued by the Registry of Deeds for the City of Mandaue, with a total area of Twenty Four Thousand Three Hundred and Fourteen (24,314) square meters located at Brgy. Casili, Consolacion, Cebu, and more particularly described as follows: "A parcel of land (Plan Psu-07-01-000237, L.R. Case No. N-972, L.R.C. Record No. N-47235), situated in the Barrio of Casili, Municipality of Consolacion, Province of Cebu. . . . . Containing an area of Twenty Four Thousand Three Hundred and Fourteen (24,314) square meters, more or less." On the other hand, the Association is a legal association of underprivileged and homeless citizens registered on November 4, 2004 with the Housing and Land Use Regulatory Board (HLURB), Region VII, Cebu City. The sellers executed a Deed of Absolute Sale in favor of the Association by which the former conveyed to the Association a portion of the above-described parcel of land in an area measuring Nineteen Thousand and Four Hundred Seventy-Five square meters and Thirty-One decimeters (19,475.31) at an agreed price of One Thousand Two Hundred Pesos (Php1,200) per square meter or at a total price of Twenty Three Million Three Hundred Seventy Thousand Three Hundred Seventy-Two Pesos (Php23,370,372). The Association had 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), for the purchase of the aforesaid 19,475.31 sq. m. of land, and said purchase was certified by Ma. Ana R. Oliveros, President of SHFC, as a CMP Project which shall be proportionately distributed to the Association's qualified members listed hereunder: aIcTCS No. Name of Beneficiaries 1 Casio, Wilson C. 2 Resma, Josefina A. 3 Albor, Arnel G. 4 Del Mar, Lemuel Y. 5 Del Mar, Christopher C. 6 Del Mar, Louie Y. 7 Tantan, Efren M. 8 Malinao, Maxber T. 9 Mangubat, Zosimo Jr. 10 Mapula, PJ M. 11 Gementiza, Duche L. 12 Gementiza, Alma F. 13 Tan, Ronilda R. 14 Rodriguez, Ronilo C. 15 Herrera, Rosemarie J. 16 Alfaro, Gemmary H. 17 Divinagracia, Eden N. 18 Tinsay, Griffin T. 19 Blanco, Carmelita V. 20 Del Mar, Emerita S. 21 Mojados, Junami D. 22 Fajaron, Roberto R. 23 Manila, Merlina P. 24 Manila, Gabrino P. 25 Boze, Irene C. 26 Cuadra, Ma. Catalina L. 27 Calumpang, Marilou A. 28 Antepuesto, Rey T. 29 Mendoyos, Democrito B. 30 Daniot, Marcelino B. 31 Corvera, Victor D. 32 Sabares, Teofilo T. 33 Cruz, Marcelia T. 34 Turno, Analyn B. 35 Lanoy, Diosdada A. 36 Sabares, Dioscoro O. 37 Tarona, Rosalinda A. 38 Tarona, Rosarie B. 39 Ong, Renerose B. 40 Apor, Jean G. 41 Enriquez, John Philip A. 42 Enriquez, Chiradee A. 43 Enriquez, Edna A. 44 Enriquez, Shananni A. 45 Alinsug, Evelyn S. 46 Facultad, Dindo S. 47 Lutero, Reynaldo R. 48 Nueza, Jocsan A. 49 Sollano, Maribeth P. 50 Ybaez, Reyna F. 51 Genolaga, Danilo P. 52 Ybaez, Jonathan F. 53 Cabahug, Justina P. 54 Flores, Ivy P. 55 Zao, Billmark L. 56 Tumulak, Brian P. 57 Tambacan, Rosalinda C. 58 Tarona, Donna Jean A. 59 Tarona, Alain A. 60 Costales, Francisco Jr. S. 61 Fuentes, Milvin A. 62 Mah, Mark Ernie A. 63 Maza, Eugene L. 64 Canonigo, Rowena Y. 65 Maza, Evelyn L. 66 Cortes, Eugene S. 67 Siacor, Marites O. 68 Selludo, Ritchelle P. 69 Flores, Charlotte T. 70 Masong, Ronnie C. 71 Masong, Rosalinda C. 72 Masong, Ronald C. 73 Temblor, Warlika A. 74 Alivio, Jennifer M. 75 Mendoza, Tirso Jr. A. 76 Causapin, Lucio A. 77 Ebora, Richard Y. 78 Gabunada, Rosemarie B. 79 Povadora, Renato M. 80 Guerra, Gerlie H. 81 Herbito, Analyn Q. 82 Congson, Dante B. 83 Omega, Luisito C. 84 Seno, Elsa P. 85 Enjambre, Jeffrey F. 86 Arca, Anthony D. 87 Maratas, Jocelyn F. 88 Alunsagay, Roberto Jr. G. 89 Marabarbas, Mariano J. 90 Soringa, Veronico Jr. M. 91 Soringa, Leah M. 92 Sillacay, Romulo R. 93 Aquino, Gino Rouel S. 94 Baran, Wren A. 95 Sepada, Larie V. 96 Baril, Jerry S. 97 Cinco, Shiela S. 98 Alfaro, Sweet Grace M. 99 Atencio, Charlito H. 100 Garcia, Rizalina A. 101 Mabulay, Mario B. 102 Dela Pea Florencio P. 103 Rabanes, Mency A. 104 Candaroma, Analou B. 105 Nierra, Roberto S. 106 Trapa, Louie Jay S. 107 Betito, Heronillo A. 108 Poligrates, Crisanto C. 109 Hinayon, Evans A. 110 Igcas, Antonio I. 111 Generoso, Judith N. 112 Sarol, Susan O. 113 Hinayon, Rex S. 114 Tambolero, Ronn Neil J. 115 Tambolero, Rose Loraine J. 116 Rosaldo, Ricardo Jr. L. 117 Rosaldo, Leslie Joy L. 118 Bantilan, Jerica R. 119 Wagas, Fe M. 120 Escanillan, Fevelyn C. 121 Cuerbo, Dolores R. 122 Maratas, Erwin G. 123 Quiros, Roselyn U. 124 Dagale, Jocelyn G. 125 Cuerbo, Joselito R. 126 Alinsug, Rosa Nimfa G. 127 Ybaez, Ramelie G. 128 Sumanting, Vincent V. 129 Torremocha, Isagani T. 130 Sumanting, Diomer V. 131 Tumabini, Raymundo D. 132 Canonigo, Wacky Jones R. 133 Herediano, Carmenchito V. 134 Soon, Angelica M. 135 Amarado, Cornelio P. 136 Delos Santos, Mark C. 137 Bastillada, Lorena S. 138 Quinoes, Gigi S. 139 Malinao, Rolito B. 140 Tuico, Lolita S. 141 Colonia, Liza A. 142 Pepito, Teodoro P. 143 Malmis, Juliano L. 144 Abellar, Evangeline J. 145 Lecciones, Ma. Vilma R. 146 Angana, Loryjo C. 147 Espinoza, Remegio T. 148 Espinoza, Regner T. 149 Raymundo, Roy E. 150 Gallentes, Angelito C. 151 Alcala, Lolita E. 152 Bandolon, Julia R. 153 Mindajao, Margarito R. 154 Rosalejos, Madeline N. 155 Garcia, Jerry D. 156 Rosalejos, Samson P. 157 Bonifacio, Ma. Donna C. 158 Solario, Eulenar P. 159 Samonte, Melinda R. 160 Antolijao, Jonathan C. 161 Antolijao, Wendel C. 162 Pabillaran, Mark R. 163 Escasinas, Carmila I. 164 Lebunfaci, Dolores A. 165 Argawanon, Cresendo Q. 166 Borabo, Floricel C. 167 Mabulay, Rosiel A. 168 Yana, Conrado Jr. C. 169 Yana, Samuel C. 170 Bacolod, Ma. Rena R. 171 Bacolod, Reynaldo R. 172 Cuevas, Loreta R. 173 Jomuad, Wilbert A. 174 Bantilan, Mira B. 175 Delegencia, Maridel T. 176 Berrame, Randy E. 177 Alfafara, Peter Martin G. 178 Salvador, Anne Mae A. 179 Mujeres, Noli G. 180 Paican, Ramil D. 181 Lique, Jocelyn O. 182 Nazareno, Marlyn C. 183 Rabaya, Marie Jill B. 184 Rosaldo, Bernadeth I. 185 Rosaldo, Myrna L. 186 Gomez, Sofio Jr. V. 187 Albite, Marcelo B. 188 Fabroa, Romulo C. 189 Albite, Jocelyn T. 190 Burgos, Antonio L. 191 Pitlo, Emelio E. 192 Ybaez, Mary Ann M. 193 Epe, Maria Gina G. 194 Tuacao, Ciriaco Jr. C. 195 Ligaray, Harris C. 196 Gabas, Concepcion A. 197 Villarta, Varga P. 198 Paradero, Segundina C. 199 Bregente, Ricardo Jr. C. 200 Morata, Boots S. 201 Mahayag, Bibiana E. 202 Soltones, Erlinda D. 203 Librero, Rey T. 204 Martinez, Ella A. 205 Librero, Ronie T. 206 Domiguez, Jocelyn B. 207 Magno, King Keith C. 208 Toledo, Pedita 209 Siangco, Rosalina C. 210 Baron, Rolando M. 211 Tundag, Ruel M. 212 Abellanosa, Oliver G. 213 Abellanosa, Roseller G. 214 Frasco, Gina M. 215 Delloro, Josephine L. 216 Maluya, Melodina G. 217 Colina, Fedelis Christin U. 218 Yara, Ronald E. 219 Lovitos, Carmiano S. 220 Batoon, Archel M. 221 Dumanig, Teresita L. 222 Diagro, Maribuen T. 223 Zozobrado, Grecilda S. 224 Puyos, Alma M. 225 Mapula, Jovita L. 226 Manus, Evelyn C. 227 Pino, Emelia M. 228 Hapay, Victoria P. 229 Potot, Lyn C. 230 Codeniera, Oscar L. 231 Sipulo, Melizen S. 232 Sabelino, Elvira C. 233 Darasin, Imelda E. 234 Sabelino, Geiza A. 235 Andrino, Jorge Jr. A. 236 Alfaro, Robert E. 237 Becaldo, Rosita S. 238 Monsion, Edilberta T. 239 Capito, Nelia A. 240 Chi, Harvey S. 241 Ursabia, Elma C. 242 Genobia, Roland S. 243 Urtezuela, Lito C. 244 Lanurias, Natalio P. 245 Jael, Mary Jane B. 246 Arela, Juvy D. 247 Ursal, Carmelina M. 248 Berances, Geraldine U. 249 Castro, Danilo T. 250 Mantile, Efrinaldo E. 251 Cosgapa, Julius C. 252 Bontilao, Mary Jean A. 253 Mendoza, Meldomin D. 254 Mendoza, Domel A. 255 Labasan, Reynaldo R. 256 Labasan, Amorlina D. 257 Nayre, Maricel T. 258 Pacanza, Antonio T. 259 Ortiz, Letecia D. 260 Digamon, Laura D. 261 Guido, Estelita P. 262 Limpag, Ellezer O. 263 Mendoza, Lilit C. 264 Bejoc, Alvin L. 265 Martinez, Antonio A. 266 Abelong, Ike Nelson A. 267 Gimarangan, Joe Dixon D. 268 Daniel, Gaudencio M. 269 Del Rosario, Ethan T. 270 Del Rosario, Alaric T. 271 Ortiz, Elmer T. 272 Boraus, Analyn D. 273 Arnado, Angie B. 274 Geraldez, Joefel L. In reply thereto, 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: 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, 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" CAcDTI xxx xxx xxx 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 subject property executed by the sellers in favor of the Association is exempt from the capital gains tax. It is to be made clear however, that the exemption covers only the actual area covered by the CMP Project, which is the 19,475.31 square meters, as per attached Certification of the President of the SHFC, and not the entire 24,314 sq. m. of the subject property. (BIR Ruling No. 30-2012 dated January 16, 2012) Furthermore, the documentary stamp tax is not one of the taxes covered by the tax exemption clause in Sec. 20 of RA 7279. Accordingly, the sellers are liable to pay the documentary stamp tax on the documents conveying the property pursuant to 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. 30-2012 dated January 16, 2012) It is, however, understood that the Certificate Authorizing Registration (CAR) shall only be issued after it is established upon proper verification by the Revenue District Officer (RDO) concerned that, considering the rules on valuation of real property, the selling price per sale transaction for each qualified beneficiary does not exceed the price ceiling of P400,000.00 for house and lot packages and P160,000.00 for lots only, pursuant to Revenue Regulations No. 17-2001. Moreover, any transfer of the real property from the Association to the individual members thereof is not subject to either the capital gains tax imposed under Section 27 (D) (5) of the Tax Code of 1997, or the creditable withholding tax imposed under Revenue Regulations No. 2-98, as amended, considering that the said transfer/transaction is merely a formality to finally effect transfer of titles of the real property to the member-beneficiaries who actually bought the same. DHSACT Such lack of consideration does not, likewise, render the transfer subject to the donor's tax imposed under Section 99 of the Tax Code of 1997, since there is no intention on the part of the association to donate said property to the members considering that the members of the association could not donate properties the ownership of which belongs to themselves (member-beneficiaries). Furthermore, the deed to be executed by the Association to effect the aforesaid transfer in favor of its individual members 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. Finally, 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 beneficiary association of the socialized housing program 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 used for socialized housing pursuant to RA No. 7279. 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 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 disclosed that the facts are different, then this ruling shall be considered null and void. aAHDIc Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue