Napico Homeowners Association VIII, Inc.

June 24, 2010 BIR RULING [SH-(014) 056-10] RA 7279; BIR Ruling No. 398-93; BIR Ruling No. DA-468-98; BIR Ruling No. SH-(041)317-09; BIR Ruling No. SH-(042)323-09 Napico Homeowners Association VIII, Inc. 851 Labanos Street, Napico, Manggahan, Pasig City Attention: Ms. Olivia M. Gaspe NAHA VIII President Gentlemen : This refers to your letter dated July 28, 2009 requesting on behalf of NAPICO HOMEOWNERS ASSOCIATION VIII, INC. (NAHA VIII) for an exemption from the payment of capital gains tax and documentary stamp tax relative to the transfer/individualization of title of a parcel of land from the NAHA VIII in favor of its qualified member-beneficiaries pursuant to Republic Act 7279 otherwise known as the "Urban Development and Housing Act of 1992". It is represented that NAHA VIII with Taxpayer's Identification No. 003-980-209-000, is the registered owner of a parcel of land located at Barangay Manggahan, Pasig City and covered by Transfer Certificate of Title (TCT) No. PT-119392 issued by the Registry of Deeds for Pasig City; that it is a non-stock, non-profit organization duly registered with the Home Insurance and Guarantee Corporation (HIGC) with Registration No. 04-2728 dated July 25, 1994; that the aforesaid lot was acquired through a loan under the Community Mortgage Program (CMP) of the National Home Mortgage Finance Corporation (NHMFC);that said project was taken-out/paid on December 23, 2002 in the amount of Twelve Million Eight Hundred Forty-Two Thousand Five Hundred Eighty and 78/100 pesos (P12,842,580.78);and that NAHA VIII, is now in the process of subdividing the purchased property to its 294 member-beneficiaries. In support of its request, NAHA VIII has completely submitted on April 28, 2010 the following documents: 1. Written Application for Exemption filed with the Law Division; 2. Certified True Copy of the Transfer Certificate of Title (TCT); 3. Certification from the National Home Mortgage Finance Corporation (NHMFC) that the property was acquired through CMP; DTcASE 4. Certified true copy of the Articles of Incorporation and By-laws of the NAHA VIII; 5. Certified true copy of the Masterlist of qualified beneficiaries; 6. BIR Certificate of Registration of NAHA VIII; 7. Certified true copy Certification from the City of Pasig of the Subdivision Approval; and 8. Certified true copy of the Approved Subdivision Plan. In reply, please be informed that the transfer in favor of your individual member-beneficiaries of the said subdivided property is not subject to either the capital gains tax imposed under Section 27 (D) (5) of the Tax Code of 1997, as amended, or the creditable withholding tax imposed under Revenue Regulations No. 2-98, as amended, implementing Section 57 (B) of the same Code, considering that the said transfer of property is without any consideration since it is merely a formality to finally effect the transfer of the said property to its member-beneficiaries who actually bought the same from the former owner through your Association. In other words, the association is in fact transferring the ownership of the property to its member-beneficiaries who actually own the same. Furthermore, the said transfer is not subject to the donor's tax imposed under Section 99 of the Tax Code of 1997, since there is no donative intent or intention on your part to donate the said property to said member-beneficiaries, considering that you could not donate property the ownership of which belong to the donees (member-beneficiaries) themselves. (BIR Ruling DA-468-98 dated October 29, 1998) It is noted that under Section 196 of the Tax Code of 1997, the deeds or documents subject to the documentary stamp tax imposed therein are those where the realty sold shall be granted, assigned, transferred, or otherwise conveyed to a purchaser or purchasers or to any other person or persons designated by such purchaser or purchasers, thereby excluding from its purview the instant case considering that the supposed purchasers are actually the owners thereof. Besides, no consideration is involved in said transaction upon which the tax imposed could be based. Accordingly, the transfer of title of the said property in favor of your member-beneficiaries is not subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. However, the notarial acknowledgment to said deed of conveyance is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the Tax Code of 1997. (BIR Ruling No. 398-93 dated October 11, 1993) EAIcCS It is, however, understood that the Certificate Authorizing Registration (CAR) shall only be issued after the submission of the requirements provided under RMO 15-2003 and after it is established upon proper verification by the Revenue District Officer (RDO) concerned that, considering the rules on valuation of real property, the actual selling price per sale transaction of the lots in this case does not exceed P400,000.00 for each qualified beneficiaries. (BIR Ruling No. SH-(041)-317-09 dated May 15, 2009 and BIR Ruling No. SH-(042)-323-09 dated May 20, 2009) 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, and/or any of the requirements set forth in this letter are not complied with, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) MARISSA O. CABREROS OIC-Assistant Commissioner Legal Service