City Government of Taguig

March 3, 2009 BIR RULING [SH-(016) 168-09] RA 7279; S-32-077-2000 City Government of Taguig Taguig City Hall Gen. Antonio Luna St. Tuktukan, Taguig City Attention: Mr. Wilfredo C. Villar City Administrator Gentlemen : This refers to your letter dated August 27, 2008 requesting for a ruling that the acquisition of the City Government of Taguig of a parcel of land to be developed pursuant to its socialized housing program is exempt from the payment of capital gains tax. Documents submitted show that Food Terminal, Inc. (FTI) is the registered owner of a property known as the FTI Complex located in Western Bicutan, Taguig City containing an aggregate area of one hundred twenty (120) hectares and covered by Transfer Certificate of Title (TCT) No. 13466 of the Registry of Deeds for the Province of Rizal. There are informal settlers scattered within a portion of the said property with an area of one hundred eighteen thousand (118,000) sq.m., more or less. President Gloria Macapagal-Arroyo issued a Memorandum Order dated February 24, 2004 directing FTI to convey to the then Municipal Government of Taguig the use of a portion of FTI Complex currently occupied by incalcetrants for purposes of socialized housing. Now, the city government in partnership with the Habitat for Humanity, Phils., Inc. and the Rotary Club of Manila is undertaking the FTI-Rotaryville Family Townhomes Project which involves the construction of eight (8) medium-rise buildings consisting of ninety six (96) units located at the subject complex. The Home Development Mutual Fund (HDMF) has granted the City Government of Taguig a Funding Commitment Line (FCL) in the sum of five million pesos (P5,000,000.00) to cover the individual loan take-out of the first twenty four (24) beneficiaries of the project. The beneficiaries of the project will be the city employees, PNP/military personnel, teachers, in-site relocates and other qualified beneficiaries who will avail of a housing loan with HDMF thru the Community Mortgage Program (CMP). The said venture was certified by the Housing and Urban Development Coordinating Council (HUDCC) to benefit low-income workers/employees and constituents of Taguig City and classified the same as a socialized housing project. HDacIT In reply, please be informed that pursuant to Sections 20 and 32 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 used 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. 12-98 on the conveyance of the parcel of land for use in the aforesaid socialized housing project. 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. In this connection, it should be mentioned that any sale made by the City of Taguig to interested parties other than the principal target beneficiaries under Sections 3 (t) and 16 of RA 7279, shall not be entitled to the foregoing tax exemption. 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 P300,000.00 (previously P150,000 or P180,000.00, as the case may be), for each qualified beneficiary. (HUDCC Memorandum Circular No. 03, Series of 2005) 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. AHaDSI Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service