National Housing Authority

September 15, 2009 BIR RULING [SH-(089) 584-09] National Housing Authority Quezon Memorial Elliptical Road Diliman, Quezon City Attention: Mr. Froilan R. Kampitan Assistant General Manager Gentlemen : This refers to your letter dated August 4, 2009 requesting for exemption from the payment of project-related income taxes, capital gains tax and value-added tax (VAT) on the sale of the hereunder described properties identified as housing sites pursuant to Republic Act (RA) No. 7279, otherwise known as the Urban Development and Housing Act of 1992. It is represented that the Bases Conversion and Development Authority (BCDA) is a government instrumentality with corporate powers duly organized and existing under Republic Act (RA) No. 7227, otherwise known as the Bases Conversion and Development Act of 1992, as amended by RA No. 7917, with principal office address at BCDA Corporate Center, 2nd Floor Bonifacio Technology Center, 32nd Street, Crescent Park West, Bonifacio Global City, Taguig City; that the Housing and Urban Development Coordinating Council (HUDCC) is a government agency organized by virtue of Executive Order (EO) No. 90, with principal office at the 15th Floor BDO Plaza, Paseo de Roxas, Makati City; that on the. other hand, Fourth Estate Housing Cooperative (FEHC) is a cooperative duly organized and existing under the laws of the Philippines with office address at the National Press Club Building, Magallanes Drive, Aduana, Manila; that BCDA is tasked to accelerate the sound and balanced conversion into alternative productive uses of the military base lands and raise funds through the sale of portions of Metro Manila camps for purposes of the bases conversion project with the end purpose of promoting the economic and social development of the country; that pursuant to RA No. 7227, EO No. 44 (series of 1993) transferred portions of the Fort Bonifacio and Villamor Air Base to BCDA; that as a result of the transfer of the Fort Bonifacio Properties to the BCDA, the latter became the absolute and registered owner of the parcels of land covering approximately 5.2239 hectares located in Circumferential Road, Fort Bonifacio, Taguig City, covered by TCT Nos. 40513, 40514, 40515 and 40516 of the Registry of Deeds of Taguig City; that EO 71 dated February 11, 2002, amended by EO 465 dated October 3, 2005 identified the aforementioned properties, which are part of the Philippine Centennial Village, as housing sites; that EO 70 transferred the administration and control of the aforementioned properties to the HUDCC, as the Administrator, and designated the latter as the lead agency in the implementation thereof; that on September 8, 2003, the BCDA as Vendor, executed a Deed of Turn Over of the Philippine Centennial Village to the Housing and Urban Development Coordinating Council or the Administrator; that on September 23, 2003, the Administrator and the National Press Club (NPC) signed a Usufruct Agreement wherein NPC is mandated to organize the FEHC, as Vendee, to implement the housing project; that NPC has assigned and transferred, as mandated by the Usufruct Agreement, all its rights including its right to purchase parcels of land which cover approximately 3.559 hectares out of approximately 5.2239 hectares covered by TCT Nos. 40513, 40514, 40515 and 40516; that as disclosed in the Deed of Sale executed on May 26, 2009, the FEHC, as Vendee, has proposed to the BCDA to exercise its right to purchase, and the Vendor, with the conformity of the Administrator, has agreed to sell to the Vendee, the aforementioned parcels of land; that instead of transferring titles and ownership of subject property to the National Housing Authority (NHA) pursuant to EO 465 and, in turn, transferring titles to the FEHC, the Vendor shall now sell and transfer titles directly to the Vendee to facilitate the completion of the housing project; and that this sale is being undertaken by the Vendor, for and in behalf of HUDCC/NHA, for which NHA has conveyed its consent to the Deed of Absolute Sale dated May 26, 2009, in a separate document to which NHA has issued a certification as to the payment of BCDA to NHA, representing the sales proceeds of several portions of the Philippine Centennial Village, Taguig City, to the FEHC. CAIHaE 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) project-related income taxes (2) capital gains tax; (3) value-added tax for the project contractor concerned;" 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 of the above-mentioned parcels of land for use in the socialized housing project. Upon application for exemption, a lien on the titles of the land shall be annotated by the Register of Deeds having jurisdiction over the properties, to the effect that the same is to be applied or is being applied to socialized housing project pursuant to R.A. 7279. Furthermore, under Revenue Regulations No. 11-97, as amended by Revenue Regulations No. 17-2001, within six (6) months after the issuance of tax exemption from the capital gains tax or creditable withholding tax, the buyer/developer of raw land shall apply with the HLURB or Local Government Unit (LGU) concerned for a permit to develop the property and shall start the development of the socialized housing project within one (1) year after the approval of the Development Permit and issuance of permit. Otherwise, the exemption from the capital gains tax or creditable withholding tax becomes automatically null and void, and the buyer/developer shall be held liable for the payment of taxes that should otherwise have been paid, plus the penalties incident to late payment. Provided, further, that in case of misrepresentation, an additional penalty equivalent to one hundred percent (100%) of the capital gains tax or creditable withholding tax due shall be imposed and paid by the buyer/developer. AIaHES 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 on this case does not really exceed P400,000.00, as the case may be, for each qualified beneficiary. Finally, as developer, you are exempt from the payment of value-added tax (VAT) on your gross receipts from the said project. However, your purchases of goods/articles shall be subject to VAT, even if the said purchases are to be used for the socialized housing project, since VAT is an indirect tax which can be passed on by the seller of the goods/services. 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