BIR Ruling No. 632-12

November 26, 2012 BIR RULING NO. 632-12 RA 7279; BIR Ruling No. 066-2011 Bryan B. Baraero San Vicente, Tabaco City Sir : This refers to the letter dated August 18, 2011 of Fernando M. Gonzales, duly indorsed by Revenue Region No. 10-Legazpi City, requesting for a ruling that the sale by Placida C. Bragais, Avelina B. Baraero and Jose C. Bragais of their property to the City Government of Tabaco intended for the latter's socialized housing program is exempted from payment of capital gains tax and other fees allowed under R.A. No. 7279, otherwise known as the Urban Development and Housing Act of 1992. aAHISE Documents submitted show that Placida C. Bragais with Tax Identification No. 426-579-641-000, Avelina B. Baraero with Tax Identification No. 426-579-747-000 and Jose C. Bragais with Tax Identification No. 939-088-949-000 are the registered owners of a parcel of land covered by Transfer Certificate of Title (TCT) No. T-150741 and designated as Lot No. 4026 of the Cadastral Survey of Tabaco issued by the Registry of Deeds for the Province of Albay. The aforestated lot is located at Brgy. San Vicente, Tabaco City containing an area of Thirty Eight Thousand Five Hundred Forty Three square meter (38,543 sq.m.) more or less. The City Government of Tabaco, on the other hand, is a public entity created and existing under the laws of the Philippines and is desirous of purchasing the said property for socialized housing purposes, thus the Sangguniang Panlunsod adopted Sanggunian Internal Resolution No. 003-2011. On March 17, 2011, a Memorandum of Agreement was executed by the City Government of Tabaco and Placida C. Bragais, Avelina B. Baraero and Jose C. Bragais, whereby the parties agreed on the acquisition of the Twenty One Thousand One Hundred Fifty Five and 74/100 square meters (21,155.74 sq.m.) portion of the subject realty at an agreed price of Five Million Five Hundred Thousand Four Hundred Ninety Two and 40/100 pesos (P5,500,492.40) at Two Hundred Sixty Pesos (P260.00) per sq.m. The purpose of the land acquisition is the relocation and housing of urban poor and informal settlers of the city pursuant to R.A. 7279. On August 17, 2011, the parties executed a Deed of Absolute Sale whereby the owners transfer and convey Twenty One Thousand One Hundred Fifty Five and 74/100 square meters (21,155.74 sq.m.) portion of the subject realty to the City Government of Tabaco as represented by Mayor Cielo Krisel Lagman-Luistro. 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 use for the project; 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. 2-98, as amended, on the conveyance of the Twenty One Thousand One Hundred Fifty Five and 74/100 square meters (21,155.74 sq.m.) portion of the subject realty for use in the aforesaid socialized housing project. (BIR Ruling No. 066-2011 dated March 9, 2011) HaIATC 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. 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 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) 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