Ms. Josephine V. Ching

July 10, 2009 BIR RULING [SH-(058) 431-09] R.A. 7279; S-20-021-2008 Ms. Josephine V. Ching c/o Velasco Urban Phase 1 Homeowners Association, Inc. Denila Bldg.,Rizal St., Tagum City Madam : This refers to your letter dated June 4, 2009, received by this Office on June 23, 2009 via 1st Indorsement dated June 16, 2009 from Revenue Region No. 19-Davao City, requesting exemption from capital gains tax of the sale of a parcel of land to Velasco Urban Phase 1 Homeowners Association, Inc. Documents submitted disclose that Josephine V. Ching is the registered owner of a 48,502 sq.m. lot covered by TCT No. T-255999 situated in Canocotan, Tagum City; that Velasco Urban Phase 1 Homeowners Association, Inc.,a legal association of underprivileged and homeless citizens, is duly registered with the Housing and Land Use Regulatory Board (HLURB) under Certificate of Registration No. 01146 dated May 10, 2002; that per Certification of the Social Housing Finance Corporation dated April 18, 2009, Velasco Urban Phase 1 Homeowners Association, Inc. secured a housing loan and financial assistance under the Community Mortgage Program in order to purchase a portion of the lot covered by TCT No. T-255999 which was further certified to be a bona fide transaction which qualifies for the tax incentives under the Program; that on May 22, 2009, a Deed of Absolute Sale was executed by and between Josephine V. Ching (seller) and Velasco Urban Phase 1 Homeowners Association, Inc. (buyer) for a 17,208.33 sq.m. portion of said TCT No. T-255999; that in support of this request, the following documents were submitted: 1. Articles of Incorporation and By-laws of Velasco Urban Phase 1 Homeowners Association, Inc. 2. Certification from Social Housing Finance Corporation 3. Certificate of Registration of Velasco Urban Phase 1 Homeowners Association, Inc. with the HLURB 4. Deed of Absolute Sale 5. TCT No. T-255999 in the name of Josephine V. Ching 6. Certificate of Tax Clearance from the City Treasurer of Tagum 7. Official Receipt for the Transfer Tax 8. Documentary Stamp Tax Return (BIR Form 2000-OT) 9. BDO BIR-BTR Deposit Slip for DST In reply, please be informed that pursuant to Sec. 32 of R.A. 7279, pertinent portion of which reads: cIECaS "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 his/her/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, as amended. Such being the case, the sale by Josephine V. Ching to Velasco Urban Phase 1 Homeowners Association, Inc. of a portion of the real property covered by TCT No. T-255999 is exempt from the capital gains tax and the expanded withholding tax. Upon issuance of this letter of exemption and upon registration of the documents of sale, a lien on the Certificate of Title to be issued in the name of Velasco Urban Phase 1 Homeowners Association, Inc. shall be annotated by the Register of Deeds having jurisdiction over the property, to the effect that the sale of said property is in accordance with the provisions of R.A. No. 7279. It is, however, observed that the documentary stamp tax is not one of the taxes covered by the tax incentives/exemption clause under Sections 20 and 32 of R.A. 7279. Thus, Velasco Urban Phase 1 Homeowners Association, Inc. is liable to pay the documentary stamp taxes on the document under Sec. 196 of the Tax Code of 1997. The documentary stamp tax shall be based on the consideration contracted to be paid or the fair market value of the realty determined in accordance with Section 6 (E) of the Tax Code of 1997, whichever is higher. (Revenue Memorandum Circular No. 42-01 dated October 5, 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, and/or any of the requirements set forth in this letter are not complied with, then this ruling shall be considered null and void. ACETIa Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service