Mamauag "B" Landas ng Pag-asa Homeowners Association, Inc.

May 5, 2009 BIR RULING [SH-(035) 301-09] RA 7279; S-32-077-2000 Mamauag "B" Landas ng Pag-asa Homeowners Association, Inc. Purok 14, Calaocan, Santiago City Attention: Mr. Norberto C. Bitantes President and Chairman of the Board Gentlemen : This refers to your letter dated April 17, 2009 requesting in effect, for a ruling that the sale of a parcel of land by Carlisle P. Landel, Grace P. Landel and Matthew W. Landel to the Mamauag "B" Landas ng Pag-asa Homeowners' Association, Inc., (Mamauag "B" HOA) 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". It appears that Carlisle P. Landel with Tax Identification No. (TIN) 274-063-867, Grace P. Landel with TIN 274-063-646 and Matthew W. Landel with TIN 274-063-381 are the registered co-owners of a parcel of land, identified as Lot No. 8493-A of the Subdivision Plan LRC Psd-42628 covered by Transfer Certificate of Title (TCT) No. T-237231 issued by the Registry of Deeds for the Province of Isabela. The aforesaid property is situated at Purok 4, Calaocan, Santiago City with an area of thirty thousand (30,000) sq.m. Mamauag "B" HOA, on the other hand, is a homeowner's organization registered with the Housing and Land Use Regulatory Board (HLURB),Region 2, Tuguegarao City with TIN 006-289-492. The registered officers and members of Mamauag "B" HOA are at present occupying a portion of the lot (Subject Property) with an aggregate area of twenty thousand six hundred ninety eight (20,698) sq.m.,more or less, for dwelling/residential purposes, identified as Blocks 1, 2, 3 and 4 (excluding Lot 20) of Lot 8493-A of Subdivision Plan LRC Psd-42628. On April 20, 2009 the parties executed a Deed of Sale whereby the owners thru their Attorney-in-Fact, Aurora M. Landel transfer and convey the Subject Property to Mamauag "B" at an agreed price of Six Million Two Hundred Nine Thousand Four Hundred Pesos (P6,209,400.00) at three hundred pesos (P300.00) per sq.m. Mamauag "B" HOA will be securing a housing loan under the Community Mortgage Program (CMP),a financing assistance program of the Social Housing Finance Corporation (SHFC) a subsidiary of the National Home Mortgage Finance Corporation (NHMFC). ITDSAE Documents submitted show that the actual occupants of the Subject Property are members of Mamauag "B" HOA and have no real properties declared in their names for taxation purposes as per certification issued by Mr. Benito H. Ines, City Assessor of Santiago City, Isabela. In reply, please be informed that pursuant to Sections 20 and 32 of 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: (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; and" 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 property by Carlisle P. Landel, Grace P. Landel and Matthew W. Landel to Mamauag "B" 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, Carlisle P. Landel, Grace P. Landel and Matthew W. Landel are liable to pay the documentary stamp tax on the documents conveying the afore-stated property imposed under Section 196 of the Tax Code of 1997, 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. 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 P400,000.00 for each qualified beneficiaries per HUDCC Resolution No. 1-2008 dated December 11, 2008. Moreover, the transfer of the lots from the said association to the individual members thereof 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, as amended, considering that the said transfer/transaction is merely a formality to finally effect transfer of titles of the real properties to the member-beneficiaries who actually bought the same. ECcTaS Such lack of consideration does not, likewise, render the transfer subject to the donor's tax imposed under Section 99 of the Tax Code of 1997, since there is no intention on the part of the association to donate said properties to the members considering that the members of the association could not donate properties the ownership of which belongs to themselves (member-beneficiaries). Furthermore, the deed to be executed by Mamauag "B" HOA to effect the aforesaid transfer in favor of its individual members 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. 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. (BIR Ruling No. S-32-077-2000 dated August 14, 2000) 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. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service