Federation of Women in Cooperative

October 9, 2009 BIR RULING [SH-(096) 634-09] RA 7279; S-32-077-2000 Federation of Women in Cooperative Mother Barangay, Tamontaka, Cotabato City Attention: Lucia B. Nul President Gentlemen : This refers to your letter dated October 21, 2008 requesting in effect, for a ruling that the sale of a parcel of land by Aniceto Yu married to Gloria S. Lobo to Federation of Women in Cooperative is exempt from the payment of capital gains tax pursuant to Republic Act (RA) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992." It appears that Aniceto Yu married to Gloria S. Lobo is the registered owner of a parcel of land covered by as Transfer Certificate of Title (TCT) No. T-21452 situated Barrio of Tamontaka, Cotabato City with an area of thirty four thousand forty two (34,042) sq.m.;that Federation of Women in Cooperative on the other hand, was formed with the sole purpose of promoting and improving the social and economic well being of its members; that it is engaged in socialized housing with Taxpayer Identification Number (TIN) 265-030-310; and that it secured a loan under Community Mortgage Program (CMP),a financing assistance of the National Home Mortgage Finance Corporation (NMHFC). In reply, please be informed that pursuant to Sections 20 and 32 of 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: SECHIA (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 landowners who sold their properties for use in a socialized housing project are exempt from the payment of capital gains tax. Such being the case, the sale of the aforestated property by Aniceto Yu married to Gloria S. Lobo is exempt from the capital gains tax. However, the documentary stamp tax is not one of the taxes covered by the tax exemption clause in Sec. 20 of RA 7279. Accordingly, Aniceto Yu is liable to pay the documentary stamp tax on the documents conveying the afore-stated property imposed under Section 196 of the Tax Code of 1997, as amended, based on the consideration contracted to be paid for such realty or its fair market value determined in accordance with Section 6 (E) of the said Code, whichever is higher. 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 for each qualified beneficiaries per issuance of HUDCC Resolution No. 1-2008 dated December 11, 2008. Moreover, the transfer of the lots 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, as amended, 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 cooperative to donate said properties to the members considering that the members of the cooperative could not donate properties the ownership of which belongs to themselves (member-beneficiaries). AaITCS Furthermore, the deed to be executed by Federation of Women in Cooperative 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 Tax Code of 1997, as amended. Finally, upon issuance of this letter of exemption, and upon registration of the document of sale, a lien on the Certificates of Title of the land to be issued in the name of the beneficiary cooperative of the community mortgage 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. 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