Benjamin Construction Equipment, Inc.

October 19, 2009 BIR RULING [SH-(099) 660-09] R.A. No. 7279; SH (059) 332-2008 dated 12/3/08 Benjamin Construction Equipment, Inc. No. 41 Fifth St., (B. Serrano St.) Benjamin Bldg., Grace Park, Caloocan City Attention: Veronica E. Lim President/CEO Gentlemen : This refers to your letter dated August 10, 2009, requesting exemption from the payment of taxes pursuant to Section 20 of the Republic Act 7279, otherwise known as the "Urban Development and Housing Act of 1992". Documents submitted disclosed that BENJAMIN CONSTRUCTION EQUIPMENT, INC. (Benjamin Construction, for short) with TIN: 004-554-241 is registered and certified by the Housing and Land Use Regulatory Board (HLURB) as habitually engaged in socialized housing projects; that the Benjamin Village 3 Community Housing Project (BV3, for brevity), located at Brgy. Sto. Cristo, San Jose Del Monte City, Bulacan, caters low income earners, the under privileged and homeless to give opportunities to individuals and families to purchase lots and house and lots by way of reduced selling price approved by the HLURB; that you were issued by the HLURB Certificate of Registration No. 09837 on May 31, 2004 and a License to Sell No. 09575 on same date. In reply, please be informed that pursuant to Section 20 of R.A. No. 7279 provides: "SECTION 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: AHDcCT xxx xxx xxx (d) Exemption from the payment of the following: xxx xxx xxx (2) Capital gains tax on raw lands used for the project; xxx xxx xxx" The owners of the raw lands are exempt from the payment of capital gains tax on the conveyance of the property, corresponding to the portion thereof that will be used in the aforestated socialized housing project. Upon application for exemption, a lien on the titles of the lands shall be annotated by the Register of Deeds having jurisdiction over the properties, to the effect that the same are being applied to socialized housing project pursuant to RA No. 7270. However, the sale is subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997, based on the consideration or the fair market value, whichever is higher. Furthermore, under Revenue Regulations No. 11-97, within six (6) months after this 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 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 on and paid by the buyer/developer. In this connection, any sale made by the developer to interested parties other than the principal target beneficiaries under Sections 3 (t) and 16 of RA No. 7279, shall not be entitled to the foregoing tax exemption should there be non-compliance with any of the sine qua non terms and conditions as aforestated for tax exemption purposes. 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 actual selling price per sale transaction of the units in this case does not really exceed P400,000.00. Thus, sale of a unit above the maximum amount shall be subject to the corresponding internal revenue taxes. ESHcTD However, it is observed that documentary stamp tax is not one of taxes covered by the tax exemption clause in Section 20 of RA No. 7279. Such being the case, the project developer/sellers shall be liable to pay the documentary stamp tax on the documents conveying the properties imposed under Section 196 of the Tax Code of 1997, based on the consideration contracted to be paid for such realties or on their fair market value determined in accordance with Section 6 (E) of the said Code, whichever is higher. Furthermore, the transfer of title of the said property from the developer to the beneficiaries is subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. However, the notarial acknowledgement 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. 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