Valderrama Homeowners Association, Inc.

February 24, 2009 BIR RULING [SH-(012) 127-09] RA 7279; S-20-010-2007 Valderrama Homeowners Association, Inc. Purok Valderrama, Sta. Filomena, Iligan City Attention: Loreto T. Arlante President Gentlemen : This refers to your letter dated February 28, 2008 requesting for a ruling that the sale of parcel of land by Negros Integrated Industries Corporation to Valderrama Homeowners Association, Inc. 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". Documents submitted show that Negros Integrated Industries Corporation is the registered owner of a parcels of land located at Sta. Filomena, Iligan City, covered by TCT Nos. T-27033 and T-27034, issued by the Registry of Deeds for Iligan City; and that Valderrama Homeowners Association, Inc. on the other hand, is a non-stock, non-profit association certified by the Social Housing Finance Corporation, a subsidiary of National Home Mortgage Finance Corporation (NHMFC), under Community Mortgage Program, a financing assistance program of the said corporation with Taxpayer Identification Number (TIN) 005-873-287-000. In reply, please be informed that pursuant to Sections 20 and 32 of RA No. 7279, pertinent portions of which state that: DHcESI '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;' 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 Negros Integrated Industries Corporation to Valderrama Homeowners Association, Inc. is exempt from the capital gains 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, Negros Integrated Industries Corporation is liable to pay the documentary stamp tax on the documents conveying the properties imposed under Section 196 of the Tax Code of 1997, as amended, 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. HETDAa 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 of the lots in this case does not really exceed P150,000.00 or P180,000.00 as the case may be, for each qualified beneficiaries (now P300,000.00 per issuance of HUDCC Memorandum Circular No. 03, Series of 2005 dated June 10, 2005 issued by HUDCC Chairman and Vice-President Noli L. de Castro wherein it adjusted the socialized housing package for each qualified beneficiaries). 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. 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 null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service