Hon. Jesse M. Robredo

June 30, 2009 BIR RULING [SH-(056) 409-09] 20 (d) (2), RA No. 7279; S-20-126-97; S-20-019-01 Hon. Jesse M. Robredo Office of the City Mayor J. Miranda Ave.,Magsaysay Naga City Sir : This refers to your letter dated May 4, 2009 requesting exemption from the payment of capital gains tax on the sale of real properties in favor of the City Government of Naga for use in its socialized housing project pursuant to Section 20 (d) (2) of Republic Act (R.A.) No. 7279. aIcDCH It appears that the City Government of Naga is undertaking socialized housing projects for the benefit of the underprivileged and homeless citizens of Naga City; that on different occasions, the Sangguniang Panlungsod of Naga City passed resolutions for the expropriations and/or acquisitions through negotiation of certain parcels of land to be utilized for its socialized housing program, and likewise, for the appropriations of funds for the said expropriation/acquisitions and that the City Government of Naga has acquired on different dates the following properties in its favor to be used in its socialized housing projects: Property Involved/Location Owner Mode/Date of Acquisition 1) Parcel of land located at Brgy. - Lilia Barcela - Negotiated sale, Carolina, Naga City covered December 22, 2006 TCT No. 1404 of the Registry of Deeds of Naga City. 2) Parcel of land located at Brgy. - Heirs of Mariano Dy Negotiated sale, Cor. Pequea, Naga City Liacco & Beatriz U. August 28, 2007 covered by TCT No. 55426 Dy Liacco of the Registry of Deeds of Naga City. 3) Parcels of land located at - Michael M. Austria - Negotiated sale, Brgy. Carolina, Naga City March 13, 2008 covered by TCT No. 52929 of the Registry of Naga City (31,653 sq.m. portion only) In reply, please be informed that pursuant to Section 20 of R.A. No. 7279, pertinent portion of which reads: "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) Exemptions from the payment of the following: xxx xxx xxx (2) Capital gains tax on raw lands used for the project; xxx xxx xxx." the landowner who sells his property for use in socialized housing project is exempt from the payment of capital gains tax and from the withholding tax under Revenue Regulations No. 2-98, as amended. Such being the case, the above sale of real properties covered by TCT Nos. 1404, 55426, and 31,653 sq.m. portion of TCT No. 52929, all of the Registry of Deeds of Naga City is exempt from the capital gains tax and the withholding tax. Upon issuance of this letter of exemption, and upon registration of the corresponding document of sale, a lien on the Certificate of Title of the land to be issued in the name of the City Government of Naga 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 R.A. No. 7279. However, it is observed that the documentary stamp tax is not one of the taxes covered by the tax incentives/exemption clause under Section 20 of R.A. 7279. Such being the case, the sellers of the above-mentioned properties are liable to pay the documentary stamp tax on the document conveying their respective properties to the City Government of Naga. The tax herein imposed shall be based on the actual consideration considering that one of the contracting parties is the Government pursuant to Revenue Memorandum Order 41-91 and Section 196 of the Tax Code of 1997. (BIR Ruling Nos. S-20-126-97 dated December 23, 1997 and S-20-019-2001 dated March 28, 2001) 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