Tanggapan ng Punong Lungsod

August 6, 2009 BIR RULING [SH-(072) 500-09] 32 RA 7279; S20-111-2000 Tanggapan ng Punong Lungsod Lungsod Quezon 3rd Floor, High Rise Bldg.,Elliptical Road Diliman, Quezon City Attention: Hon. Feliciano R. Belmonte, Jr. Mayor Gentlemen : This refers to your letter dated March 27, 2009 requesting for capital gains tax exemption on the transfer of a parcel of land in favor of the member-beneficiaries of Samahang Sitio Pajo 1.6 Hectares Homeowners Association, Inc. It is represented that the National Power Corporation (NPC) is the registered owner in fee simple of a parcel of land situated at Sitio Pajo, Brgy. Baesa, Quezon City with an area of 16,204 sq.m.,more or less, covered by Transfer Certificate of Title No. RT-120665 (T-65721) issued by the Register of Deeds of Quezon City; that Branch 216 of the Regional Trial Court of Quezon City issued a Decision dated December 29, 2006, cancelling the encumbrances/restrictions on the title; that the beneficiaries represent the actual occupants residing in the subject property for so many years and are willing to buy the same; that on January 3, 2005, Samahang Sitio Pajo 1.6 Hectares Homeowners Association, Inc. requested the Honorable City Mayor Feliciano R. Belmonte, Jr. to negotiate for the purchase of the subject land at P800.00 per square meter for the purpose of constituting a housing project for qualified beneficiaries; that the City Council of Quezon City after negotiations, authorized the City Mayor to enter into a MOA with the NPC for the purchase of the subject property by virtue of Resolution No. SP-3754, series of 2007; and that pursuant to the socialized housing program of Quezon City, the land shall be sold to the beneficiaries which are to be identified by the Local Inter Agency Council at a price to be determined by the Quezon City Appraisal Council as mandated by law, taking into account the cost of land, land development, survey fees, etc. and other incidental expenses vis--vis the capacity to pay the beneficiaries. CaATDE In reply, please be informed that pursuant to Sections 20 and 32 of Republic Act (RA) No. 7279, pertinent portions of which state that: "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: (d) Exemption from the payment of the following: (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" the owner of the raw land is exempt from the payment of capital gains tax or the withholding tax under Revenue Regulations No. 12-98 on the conveyance of the parcel of land for use in the aforesaid 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 RA 7279. However, the sale is subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997, as amended based on the actual consideration of the property transferred, considering that one of the contracting parties is the Government. In this connection, it should be mentioned that any sale made by Quezon City to interested parties other than the principal target beneficiaries under Sections 3 (t) and 16 of RA 7279, shall not be entitled to the foregoing tax exemption. 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 selling price per sale transaction of the lots in this case does not really exceed P400,000.00 (previously P150,000 or P180,000.00, as the case may be),for each qualified beneficiary. (HUDCC Memorandum Circular No. 03, Series of 2005) aESHDA Moreover, the transfer of the real properties from the said association to the individual members thereof is 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 properties 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 properties to the members considering that the members of the association could not donate properties the ownership of which belongs to themselves (member-beneficiaries). Furthermore, the deed to be executed by Samahang Sitio Pajo 1.6 Hectares Homeowners Association, Inc. 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, as amended. 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 same Tax Code. Finally, 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 beneficiary association of the socialized housing program 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 RA No. 7279. (BIR Ruling No. S-32-077-2000 dated August 14, 2000). 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 null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service