BIR Ruling No. 631-12

November 26, 2012 BIR RULING NO. 631-12 Republic Act No. 7279; BIR Ruling No. 066-2011 City Government of Legazpi Office of the City Mayor City of Legazpi Attention: Hon. Carmen Geraldine B. Rosal City Mayor Gentlemen : This refers to your letter dated July 15, 2011, endorsed by Revenue Region 10, Legazpi City, requesting exemption from the payment of capital gains tax relative to the sale of a parcel of land by Remedios B. Masigan in favor of THE CITY GOVERNMENT OF LEGAZPI pursuant to Republic Act (R.A.) No. 7279 otherwise known as the "Urban Development and Housing Act of 1992." It is represented that Remedios B. Masigan, with Taxpayer's Identification No. 265-167-740, is the registered owner of a certain parcel of land situated at Brgy. 27 Victory Village, Legazpi City containing an area of 2,000 sq.m. covered by Transfer Certificate of Title (TCT) No. (P) 1601 and designated as Lot No. 19287- B, MSI-V-30016-D issued by the Registry of Deeds for Legazpi City. THE CITY GOVERNMENT OF LEGAZPI, with Taxpayer's Identification No. 001-840-009, is a public entity created and existing under the laws of the Philippines. On April 6, 2010, the Sangguniang Panlungsod approved Resolution No. 0046-2010 authorizing the City Mayor to purchase said lot for THE CITY GOVERNMENT OF LEGAZPI's Resettlement and Socialized Housing Program. Subsequently, a Deed of Absolute Sale was executed on June 27, 2011 by Remedios B. Masigan in favor of THE CITY GOVERNMENT OF LEGAZPI for the sale of above-described property at the agreed price of One Million One Hundred Eighteen Thousand Six Hundred Pesos (Php1,118,600.00).The Sangguniang Panlungsod also adopted on August 23, 2011 Resolution No. 0203-2011 approving the application for a simple Subdivision Project Under Section 4, P.D. 957 of Lot No. 19287-B, MSI-V-30016-D registered in the name of Remedios B. Masigan, located at Barangay Victory Village South, Legazpi City. In support of its request, you have completely submitted the following documents on March 12, 2012, to wit: 1. Certified true copy of Transfer Certificate of Title No. (P) 1601; 2. Certified true copy of the Tax Declaration No. 0260175; 3. Certified photocopy of the Subdivision Plan of Lot 19287-B Msi-V-30016-D; 4. Duplicate Original of the Deed of Absolute Sale dated June 27, 2011; 5. Original Certification from the Housing and Land Use Regulatory Board (HLURB); cEATSI 6. Certified Photocopy of Simple Subdivision Approval (SSA) issued by the Office of the City Mayor; 7. Certified Photocopy of Sangguniang Panlungsod Resolution No. 0203-2011; 8. Certified Xerox copy of the Sangguniang Panlungsod Ordinance No. 019-93 approved on July 5, 1993; 9. Sworn Statement of Remedios B. Masigan that the subject property shall be used as site for Socialized Housing Program; 10. Copy of BIR Form No. 2000-OT (Documentary Stamp Tax Declaration/Return);and 11. Tax Identification Nos. of the Buyer and Seller. In reply, please be informed that pursuant to Section 20 of Republic Act (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: 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: cEASTa xxx xxx xxx" the owner of the raw land is exempt from the payment of capital gains tax or the withholding tax under Revenue Regulations No. 12-98, * as amended, on the conveyance on the portion of land which will be actually used for socialized housing project. Upon application for exemption, a lien on the title of the land shall be annotated by the Register of Deeds having jurisdiction over the property, to the effect that the same is to be applied or is being applied to socialized housing project pursuant to RA 7279. However, the sale is subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997 based on the actual consideration of the property transferred, considering that one of the contracting parties is the Government. (BIR Ruling No. 066-2011 dated March 9, 2011) 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 in the name of THE CITY GOVERNMENT OF LEGAZPI 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 requirement provided under RMO 15-2003, including proof of payment of documentary stamp tax. 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