Banilad Residents Pundok Panaghiusa I Homeowners Association, Inc.

May 17, 2010 BIR RULING [SH-(006) 023-10] RR 17-2001; RA 7279; BIR Ruling Nos. 051-96; S-20-010-2007; S-20-071-2007; S-20-065-2007; S-32-015-2008 Banilad Residents Pundok Panaghiusa I Homeowners Association, Inc. Casuntingan, Mandaue City Attention: Mr. Carmen Cajegas President Gentlemen : This refers to your letter dated September 23, 2009 as indorsed by the Regional Director, Revenue Region No. 13, Cebu City, requesting in effect, for a ruling that the sale of several parcels of land by Spouses Benigno and Nicolasa Dionson to the Banilad Residents Pundok Panaghiusa I, Inc. (BRPPII) is exempt from the payment of capital gains tax pursuant to Republic Act (RA) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". EIAHcC It appears that Spouses Benigno Dionson (TIN 105-320-476-000) and Nicolasa Dionson (TIN 232-411-579) are the registered owners of four (4) parcels of land covered by Transfer Certificates of Title (TCTs) Nos. 35176, 27808, 27809 and 27810 all of the Registry of Deeds for the City of Mandaue. The aforesaid properties are situated at Casuntingan, Mandaue City with an aggregate area of 4,378 sq.m. On the other hand, BRPPII (TIN 240-962-231-000) is a legal association of underprivileged and homeless citizens registered with the Securities and Exchange Commission (SEC) under SEC Reg. No. C200200011 dated January 14, 2002. It is likewise a registered homeowners association with the Housing and Land Use Regulatory Board (HLURB),Region VII, Cebu City under Registration No. 00513 dated November 19, 2002. On September 15, 2009 the parties executed a Deed of Absolute Sale whereby the owners transfer and convey the properties to BRPPII for and in consideration of P6,567,000.00. The latter has 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 acquisition of the lots that its qualified member-beneficiaries occupy. Furthermore, Ms. Chloe Manlosa-Osano, Regional Director, Field Operations Division for the Visayas, Presidential Commission for the Urban Poor and operating under the Office of the President had certified that BRPPII is duly accredited by their Office as a legitimate urban poor organization. In reply, 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: (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" AIDSTE 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 aforestated properties by Spouses Benigno and Nicolasa Dionson to BRPPII is exempt from the capital gains tax. The RDO shall issue the corresponding Certificate Authorizing Registration and/or Tax Clearance (CAR/TCL) only after the submission of the necessary and requisite documents stated in Section 5 of RR 17-2001, including proof of payment of the corresponding documentary stamp tax imposed under Section 196 of the Tax Code of 1997. Submitted copy of the filed DST return shows that the DST was computed based on the actual consideration of sale, however, RR 17-2001 provides that the documentary stamp tax shall be paid on every sale of property under the CMP, based on the higher of the actual consideration of sale stated in the document or of the fair market value to be determined by comparing the zonal value as determined by the Bureau of Internal Revenue and the Local Government Assessor's fair market value. It is only when one of the contracting parties is the government that the documentary stamp tax shall be based on the actual consideration paid for the real property. On the basis of the foregoing, the Revenue District Officer (RDO) concerned is hereby directed to make sure that the correct documentary stamp tax has been paid. 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 the capital gains tax or income tax imposed under 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 Certificates 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. (BIR Ruling No. S-32-077-2000 dated August 14, 2000) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered as null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) MARISSA O. CABREROS OIC-Assistant Commissioner Legal Service