Mr. Higinio Castañares

May 26, 2010 BIR RULING [SH-(007) 028-10] RA 7279; RR 11-97;419-93; 393-93; S-20-075-2007 Mr. Higinio Castaares Barangay Tandang Sora Butuan City Sir : This refers to your letter dated February 18, 2010 which was indorsed by Revenue Region No. 17, Butuan City on March 1, 2010 requesting for exemption from the payment of capital gains tax on the sale of a parcel of land by Mr. Santiago Carampatana in favor of the City of Butuan which the latter will use for socialized housing project, known as the Relocation Site located at Barangay Bit-os, Mandacpan, Butuan City, pursuant to the provisions of Republic Act (RA) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992", as implemented by Revenue Regulations No. 11-97. AIHaCc Based on your representations, as well as from the documents submitted, the facts are as follows: 1. On February 12, 2010, a Deed of Absolute Sale was executed by and between Santiago Carampatana, as seller, and the City of Butuan, as the buyer, for the purchase of a parcel of land covered by Transfer Certificate of Title (TCT) No. RT-32922 situated at Barangay Mandacpan, Butuan City with a total area of Twenty One Thousand Eight Hundred Sixty Eight (21,868) square meters. 2. The said parcel of land was acquired by the City of Butuan to be used as relocation site of Moonrockville Neighborhood Association, Inc., Barangay Bit-os. 3. Pursuant to Sangguniang Panlungsod Resolution No. 538-2009 dated December 23, 2009, the City Council of Butuan authorized the Hon. City Mayor of Butuan Democrito D. Plaza II to sign the Deed of Absolute Sale acquiring a parcel of land owned by Mr. Santiago Carampatana located at Mandacpan, Butuan City. In reply, please be informed that Sections 20 and 32 of RA No. 7279, as implemented by Revenue Regulations (RR) No. 11-97, read: "Sec. 20. Incentives for the 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: (1) . . .; (2) Capital gains tax on raw lands used for the project; DSIaAE (3) . . .;" 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" From the afore-quoted provisions of RA No. 7279, it is clear that the landowner who sells his property for use in socialized housing project is exempt from the payment of capital gains tax and from the withholding tax under RR No. 2-98, as amended. Such being the case, the sale of real property covered by TCT No. RT-32922 in favor of the City of Butuan is exempt from the payment of capital gains tax and withholding tax. However, the documentary stamp tax is not one of the taxes covered by the tax exemption clause in Sec. 20 of RA 7279. Accordingly, Santiago Carampatana is liable to pay the documentary stamp tax on the Deed of Absolute Sale pursuant to Section 196 of the Tax Code of 1997, as amended by Republic Act (RA) No. 9243, 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. 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