City of Taguig

March 3, 2009 BIR RULING [SH-(017) 171-09] RR 11-97;S-20-038-2006 City 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 20, 2008 requesting for exemption from the payment of capital gains tax on your purchase of raw land intended for socialized housing project 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. Based on your representations, as well as from the documents submitted, the facts are as follows: 1. On August 20, 2008, a Deed of Absolute Sale was executed by and between Nieves R. de Guzman, as seller, and the City of Taguig, as the buyer, for the purchase of a parcel of land covered by Transfer Certificate of Title (TCT) No. 42633 situated at Barangay Calzada, Tipas, City of Taguig with a total area of Five Thousand Four Hundred Fifty (5,450) square meters. 2. The said parcel of land was acquired by the City of Taguig as "In-city relocation site project" to be undertaken by the City of Taguig and Habitat for Humanity Philippines, Inc. intended for disposition to PNR relocates affected by Rail Linkage Project. 3. The said proposed project was duly certified by the Housing and Urban Development Coordinating Council (HUDCC) as intended for disposition to PNR relocates affected by Rail Linkage Project and is classified as a socialized housing project. 4. Pursuant to Sangguniang Panlungsod Resolution No. 03-2008 dated January 14, 2008, the City Council of Taguig authorized the Hon. City Mayor of Taguig to enter into any agreement or contract with any national government entity for the implementation of the In-City Relocation Program of the Rail-Linkage Project. In reply, please be informed that Section 20 of RA No. 7279, as implemented by Revenue Regulations (RR) No. 11-97, reads: TCcIaA "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; (3) . . .;" 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. 42633 in favor of the City of Taguig is exempt from the payment of capital gains tax and withholding tax. Upon issuance of this letter of exemption and upon registration of the corresponding documents of sale, a lien on the Transfer Certificate of Title of the land to be issued in the name of the City of Taguig shall be caused to be annotated by the Register of Deeds having jurisdiction over the said property to the effect that the said property shall be used for socialized housing pursuant to RA No. 7279. However, it is observed that the documentary stamp tax is not one of the taxes covered by the tax incentives/exemption clause under Section 20 of RA No. 7279. Thus, the seller of the abovementioned property is liable to pay the documentary stamp tax on the document conveying the aforementioned real property to the City of Taguig pursuant to Section 196 of the Tax Code of 1997, as amended. 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. cSTHAC Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service