Kapatirang Samahan ng Maligaya (KASAMA) Homeowners Association, Inc.

May 20, 2009 BIR RULING [SH-(042) 323-09] RA 7279; S-20-035-2008 Kapatirang Samahan ng Maligaya (KASAMA) Homeowners Association, Inc. (Phase 2) Pasong Putik, Quezon City Attention: Mr. Johhny A. Balabbo President Gentlemen : This refers to your letter dated March 24, 2009 requesting for an exemption from the payment of capital gains tax and documentary stamp tax relative to the transfer/individualization of titles of a parcel of land from the Kapatirang Samahan ng Maligaya (KASAMA) Homeowners Association, Inc. (Phase 2) in favor of its qualified member-beneficiaries pursuant to Section 32 (b) of Republic Act (RA) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". Documents submitted show that KASAMA Homeowners Association, Inc. (Phase 2) is the registered owner of a parcel of land located at Bougainvilla Street, Maligaya Park, Pasong Putik, Novaliches, Quezon City and covered by Transfer Certificate of Title (TCT) No. N-317022 issue by the Registry of Deeds for Quezon City; that it is a non-stock, non-profit organization duly registered with the Housing and Land Use Regulatory Board (HLURB);that the aforesaid lot was acquired through a loan under the Community Mortgage Program (CMP) of the Social Housing Finance Corporation (SHFC);and that the KASAMA Homeowners Association, Inc. (Phase 2) is now in the process of subdividing the purchased properties that will eventually be distributed to its member-beneficiaries. In reply, please be informed that the transfer in favor of your individual member-beneficiaries of the said subdivided properties 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 properties is without any consideration since it is merely a formality to finally effect the transfer of the said properties 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 properties to its member-beneficiaries who actually own the same. cAECST 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 actual selling price per sale transaction of the lots in this case does not really exceed P180,000.00 or P225,000.00, as the case may be, for each qualified beneficiaries (now P400,000.00 per issuance of HUDCC Resolution No. 1-2008 dated December 11, 2008). Moreover, the said transfer is not subject to the donor's tax imposed under Section 99 of the Tax Code of 1997, considering that your association could not donate properties the ownership of which belongs to the transferees (member-beneficiaries) themselves. Furthermore, the transfer of titles of the said properties 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, 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. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service