Philippine Columbian Association

June 9, 2009 BIR RULING [SH-(050) 368-09] S-20-028-07 Philippine Columbian Association Plaza Dilao, Paco MANILA Attention: Mr. Jose T. Patajo President Gentlemen : This refers to your letter dated November 5, 2008, which was referred to this Office by Revenue Region No. 6, Manila, by way of 1st Indorsement dated May 13, 2009, requesting for an exemption from the payment of capital gains tax on the involuntary sale of a parcel of land to the City of Manila for its socialized housing project under Republic Act (RA) No. 7279, otherwise known as the Urban Development and Housing Act of 1992, as implemented by Revenue Regulations No. 11-1997, as amended by Revenue Regulations No. 17-2001. It is represented that on September 14, 1990, a Decision was rendered by the Regional Trial Court of Manila Branch 41 expropriating the said parcel of land pursuant to City of Manila Ordinance expropriating the subject property for the purpose of awarding the said property to qualified and bonafide occupants thereat pursuant to the Land for the Landless and socialized housing program of the City of Manila; that the said decision was elevated by the defendant, Philippine Columbian Association (PCA), to the Court of Appeals which was dismissed on November 30, 1992 and thereafter to the Supreme Court by way of a Petition for Review on Certiorari; that said petition was likewise dismissed by the Supreme Court dated December 21, 1993; that the case was referred to a Panel of Commissioners for determination of just compensation; that on March 11, 1997, the Court issued an order fixing the just compensation in the amount of P12,179,305.00; that a motion to require the plaintiff, the City of Manila, to pay just compensation was filed by the defendant on July 6, 1999 and on September 16, 1999, an Order was issued by the Court granting the Motion for Execution and directing the City of Manila to pay the just compensation plus 6% interests per annum until the amount is fully paid; that on October 28, 2005 the plaintiff through the Urban Settlement Office of Manila paid the amount of P12,107,000.00 leaving the interest unpaid; that on August 6, 2008, the City of Manila paid the interest in the amount of P11,132,394.59; and that on November 5, 2008, the Urban Settlement Office declared that since the property shall be distributed to its actual and bonafide occupants under the Land-for-the Landless Program and Socialized Housing Program of the City of Manila under RA No. 7279. HAISEa In reply thereto, please be informed that pertinent portion of Section 20 of RA No. 7279, reads: "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; (3) . . .; xxx xxx xxx" Pursuant to the aforementioned provision, the owner of the raw land is exempt from the payment of capital gains tax on the conveyance although involuntarily of the above-described property in favor of the City of Manila for use in its 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 R.A. 7279. However, the sale is subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997 based on the consideration or the fair market value, whichever is higher. 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, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service