City Engineering Department

December 10, 2009 BIR RULING [SH-(129) 767-09] S20, RA 7279; RMC 20-09; S-20-126-97; S-20-019-01 City Engineering Department Housing Development Division Puerto Princesa City Attention: Mr. Javier P. Quindoza Officer-in-Charge Gentlemen : This refers to your letter dated July 17, 2009 requesting for a ruling that the sale by Joseph M. Jiongco of a parcel of land to the City Government of Puerto Princesa is exempt from capital gains tax pursuant to R.A. No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". aTcESI It is represented that the City Government of Puerto Princesa, in line with its mandate of providing basic services to its constituents and working towards its goal of making the City of Puerto Princesa free from informal settlers in the years to come, has acquired a 20,803 square meters raw land in Barangay Maroyogon, Puerto Princesa City, covered by Transfer Certificate of Title (TCT) No. 129052 issued by the Register of Deeds of Puerto Princesa City, to be utilized for the socialized housing project of the City Government; and that for the said purpose, a Deed of Absolute Sale was executed by and between Joseph M. Jiongco and the City Government of Puerto Princesa, represented by its City Mayor, Hon. Edward S. Hagedorn. In reply thereto, please be informed that pursuant to Section 20 (d) of R.A. No. 7279, which reads: "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: 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 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 withholding tax under Revenue Regulations No. 2-98, as amended. Such being the case, the above sale of real property covered by TCT No. 129052 of the Registry of Deeds of Puerto Princesa City is exempt from the capital gains tax and the withholding tax. Upon issuance of this letter of exemption, and upon registration of the corresponding document of sale, a lien on the Certificate of Title of the land to be issued in the name of the City Government of Puerto Princesa 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 R.A. No. 7279. However, it is observed that the documentary stamp tax is not one of the taxes covered by the tax incentives/exemption clause under Section 20 of R.A. 7279. Such being the case, the sale of the above-mentioned property to the City Government of Puerto Princesa is subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997, as amended. The tax herein imposed shall be based on the actual consideration considering that one of the contracting parties is the Government pursuant to Revenue Memorandum Order 41-91 and Section 196 of the Tax Code of 1997. (BIR Ruling Nos. S-20-126-97 dated December 23, 1997 and S-20-019-2001 dated March 28, 2001) SCEDaT 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, 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