Bascaran Realty & Developer

December 11, 2009 BIR RULING [SH-(131) 771-09] RA 7279; S-32-077-2000 Bascaran Realty & Developer Garden Blossom Hotel, Suite 204 Barangay Sipi, Daraga, Albay Attention: Ms. Virginia R. Garcia Owner/Proprietor Gentlemen : This refers to your letter dated December 10, 2009 requesting for a ruling that the sale of real properties to the National Housing Authority under its Bicol Calamity Assistance Rehabilitation Effort (B-CARE) to Typhoon Victims is exempt from the payment of capital gains tax and documentary stamp tax pursuant to Sections 19 and 20 of Republic Act (RA) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". IDAESH From the documents submitted, it appears that on December 3, 2009, a Memorandum of Agreement was executed between Bascaran Realty & Developer, as the landowner/developer, Woodsville Homeowners Association, Inc. as the association and the National Housing Authority (NHA) as the implementing government agency of Calamity Assistance Rehabilitation Effort (CARE); that Bascaran Realty & Developer is the absolute and registered owner of a parcel of land located at Brgy. Bascaran, Daraga, Albay covered by Transfer Certificate of Title (TCT) No. T-136563 containing an aggregate area of 20,000 square meters; that pursuant to Republic Act No. 9401, otherwise known as the General Appropriations Act, the NHA was designated as one of the implementing agencies of the Bicol Calamity Assistance Rehabilitation Effort (B-CARE) to Typhoon Victims and for that purpose, Php750 Million was allocated; and that the Woodside Homeowners Association, Inc. (Bascaran Resettlement project), composed of families affected by "Supertyphoon Reming" of Daraga, Albay, shall be provided by the NHA with a financial grant for the acquisition of developed lots through the Community Association Initiative Approach Program (CAIAP) in the amount not exceeding Php80,000.00 per lot per affected family/member to serve as their permanent relocation site. The purchase by NHA of the afore-stated land possesses all the qualification and none of the disqualifications for it to be granted an exemption from the payment of taxes. In reply, please be informed that pursuant to Sections 19, 20 and 32 of RA No. 7279, pertinent portions of which state that: "Sec. 19. Incentives for the National Housing Authority. The National Housing Authority, being the primary government agency in charge of providing housing for the underprivileged and homeless, shall be exempted from the payment of all fees and charges of any kind, whether local or national, such as income and realty taxes. All documents or contracts executed by and in favor of the National Housing Authority shall also be exempt from the payment of documentary stamp tax and registration fees, including fees required for the issuance of transfer certificates of title. "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: EACIaT (d) Exemption from the payment of the following: (1) Project-related income taxes; (2) Capital gains tax on raw lands used for the project; (3) Value-added tax for the project contractor concerned;" 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 exempt from the capital gains tax; and xxx xxx xxx the landowners who sold their properties for use in a socialized housing project are exempt from the payment of capital gains tax and from the expanded withholding tax under Revenue Regulations No. 2-98, as amended. Such being the case, the sale of the aforestated property by Bascaran Realty & Developer to NHA is exempt from the capital gains tax and from the expanded withholding tax. Moreover, the Deed of Absolute Sale conveying the real property to NHA is not subject to the documentary stamp tax pursuant to Section 19 of RA 7279, which exempts all documents or contracts executed by and in favor of the NHA from the documentary stamp tax. On the other hand, the transfer by NHA to Woodsville Homeowners Association, Inc. of the real properties sold under RA 7279 is not subject to any tax considering that NHA only acted as a coordinating agency in providing shelter to the underprivileged and homeless citizens in pursuance of its mandated function. 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, 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. Pursuant to Section 20 of RA 7279, a project contractor of a socialized housing project shall also be exempt from the payment of value-added tax (VAT) on the project concerned. Thus, Bascaran Realty, being the project for the development of a socialized housing project known as the Bicol Calamity Assistance Rehabilitation Effort (B-CARE) to Typhoon Victims, is likewise exempt from the payment of value-added tax (VAT) on its gross receipts from the said project. However, its 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. 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 Woodsville 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. 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. 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 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) ADCEaH 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