Mandaluyong Housing & Development Board

April 3, 2009 BIR RULING [SH-(029) 249-09] 27 & 196; DA-032-01 Mandaluyong Housing & Development Board Mandaluyong City Attention: Mr. Franklin M. Cabotaje Officer-In-Charge Gentlemen : This refers to your letter dated October 6, 2008 requesting exemption from the payment of capital gains tax on the individualization/subdivision and distribution to the concerned members-beneficiaries, the actual property-owners, of the parcel of land registered in the name of Kapalaran Homeowners Association, Inc.,an organized community availing the Community Mortgage Program (CMP) with the City Government of Mandaluyong as Project Originator and financed by the Social Housing Finance Corporation (SHFC),a subsidiary of the National Home Mortgage and Finance Corporation (NHFMC). * Documents submitted disclosed that Kapalaran Homeowners Association, Inc. ("KHAI") is a homeowners association duly organized and registered with the Housing and Land Use Regulatory Board (HLURB);that KHAI availed of a housing loan through the Community Mortgage Program of the City Government of Mandaluyong in acquiring a parcel of land to be eventually subdivided to its members-beneficiaries; that the parcel of land was registered in the name of KHAI under TCT No. 23457 of the Registry of Deeds of Mandaluyong City; and that KHAI has subdivided the said property into several lots with the respective titles to be distributed to its member-beneficiaries. In reply, please be informed that the transfer in favor of the 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, or the creditable withholding tax imposed under Revenue Regulations No. 2-98, implementing Section 57 (B) of the same Code, considering that the transfer of said property is without any consideration since it is merely a formality to finally effect transfer of the said property to the member-beneficiaries who actually bought the same from the former owner through the Kapalaran Homeowners Association, Inc. In other words, the transfer is without any consideration because the homeowners association is in fact transferring the ownership of the subdivided property which actually belongs to the member-beneficiaries. TDcHCa Furthermore, the said transfer is not subject to the donor's tax imposed under Section 98 of the Tax Code of 1997, since there is no intention on the part of the association to donate said property to the members considering that the members of the association could not donate properties the ownership of which belongs to the transferees (member-beneficiaries) themselves. Moreover, under Section 196 of the Tax Code of 1997, as amended, 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 no consideration is involved in said transaction upon which the tax imposed could be based. 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, as amended. (BIR Ruling No. DA-032-01 dated March 12, 2001 citing BIR Ruling No. 398-93 dated October 11, 1993) 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, 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