National Housing Authority

June 19, 2009 BIR RULING [SH-(053) 383-09] 19, 20 and 32 RA 7279; S-20-081-A-2000 National Housing Authority Regional Office X Julio Pacana St.,Cagayan de Oro City Attention: Ms. Judy A. Fernandez OIC, Regional Manager Gentlemen : This refers to your letter dated November 10, 2008 requesting for a ruling that the sale of a property to the National Housing Authority (NHA) under its Local Housing Program (LHP) is exempt from the capital gains tax pursuant to Republic Act (RA) No. 7279 otherwise known as the Urban Development and Housing Act of 1992. Documents submitted show that Mr. Emmanuel L. Esparagoza with Tax Identification No. (TIN) 132-912-937-000, is the registered owner of a parcel of land located at Brgy. Consuelo, Magsaysay, Misamis Oriental covered by Original Certificate of Title (OCT) No. E-6151 consisting of 20,000 sq.m.; that the NHA (TIN 000-916-384) in coordination with the Representative of each congressional district, is implementing the LHP to cover implementation of socialized housing projects in urban and urbanized areas in all Congressional Districts pursuant to Housing and Urban Development Coordinating Council (HUDCC) Resolution No. 001, Series of 2001, approving the adoption of the Implementing Rules and Regulations of Rule 8-LHP of RA 7835 and NHA Board Resolution No. 4485 dated January 10, 2002; that the NHA purchased said property in full conformity that the acquisition and resale of the land subject thereof in favor of the targeted beneficiaries will be through the Sites and Services Program of the NHA using LHF as the fund source; and that the Office of the First Congressional District, Misamis Oriental has allocated the amount of P2,500,000.00 to NHA-Consuelo Village Housing Project under the LHP for the acquisition of the subject property whose total selling price is P2,500,000.00 at P125.00 per sq.m. TDAcCa In reply, please be informed that pursuant to Sections 19, 20 and 32 of RA No. 7279, pertinent portions of which read: "Sec. 19. Incentives for the National Housing Authority. The National Housing Authority, being the primary government agency in charge of providing housing for the underprivileged and homeless, shall be exempted from the payment of all fees and charges of any kind whether local or national, such as income and realty taxes. All documents or contracts executed by and in favor of the National Housing Authority shall also be exempt from the payment of documentary stamp tax and registration fees, including fees required for the issuance of transfer certificates of title. 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: xxx xxx xxx (d) Exemption from the payment of the following: (1) Project-related income taxes; (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 xxx xxx xxx" the landowner who sells its property for use in socialized housing project is exempt from the payment of capital gains tax and from the expanded withholding tax under Revenue Regulations No. 2-98. Such being the case, the sale of the aforementioned property to the NHA is exempt from the capital gains tax and the expanded withholding tax. Moreover, the sale conveying the real property to NHA is also not subject to the documentary stamp tax under Section 196 of the 1997 Tax Code, as amended, because under Revenue Memorandum Circular (RMC) No. 42-2001 dated October 5, 2001, the exemption from documentary stamp tax of the NHA in connection with any of its socialized housing project extends to the other party (either seller or buyer) that deals or transacts with the NHA. Consequently, Emmanuel L. Esparagoza, as the other party to the sale transaction, shall also be exempt from the payment of documentary stamp tax. IaEHSD On the other hand, the transfer by NHA to the beneficiaries of the Consuelo Village Housing Project of the real property sold under RA 7279 is not subject to any tax considering that NHA only acted as a coordinating agency in providing shelter to the underprivileged and homeless citizens in pursuance of its mandated function. If, in any case, an Association will transfer the real property to the individual member-beneficiaries thereof, said conveyance is likewise 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 property to the member-beneficiaries who actually bought the same. 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 property to the members considering that the members of the association could not donate a property the ownership of which belongs to themselves (member-beneficiaries). Furthermore, the deed to be executed by the association, 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. Moreover, upon issuance of this letter of exemption, and upon registration of the document of sale, a lien on the Certificate of Title of the land to be issued in the name of the NHA and/or to the beneficiary association of the socialized housing program of the NHA shall be caused to be annotated by the Register of Deeds having jurisdiction over the property, to the effect, that the said property shall be used for socialized housing pursuant to RA No. 7279. 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