San Antonio De Padua De Maligaya Homeowners Association, Inc.

December 23, 2009 BIR RULING [SH-(140) 825-09] RA 7279; S-32-077-2000 San Antonio De Padua De Maligaya Homeowners Association, Inc. Lot 9, Bougainvilla St.,Maligaya Park Subd. Novaliches, Quezon City Attention: Loreta L. Linghag President Gentlemen : This refers to your letter dated October 4, 2009 requesting for a ruling that the sale of parcels of land by Sps. Paulino M. Paredes, Jr. and Eliza Echiverri Paredes to the San Antonio De Padua De Maligaya Homeowners Association, Inc., 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". Documents submitted show that Sps. Paulino M. Paredes, Jr. and Eliza Echiverri Paredes are the registered owners of a parcel of land covered by Transfer Certificate of Title (TCT) No. RT-14573 (128075) issued by the Registry of Deeds for Quezon City and that the aforestated lot is situated at Pasong Putik, Novaliches, Quezon City; that San Antonio De Padua De Maligaya Homeowners Association, Inc., on the other hand, is a homeowner's organization registered with the Housing and Land Use Regulatory Board under Certificate of Registration No. 09769 dated December 17, 2004 with Tax Identification Number (TIN) 235-576-728; and that the said transaction was certified by the Social Housing Finance Corporation (SHFC) a subsidiary of the NHMFC as an approved project under the CMP and further certified that the purchase of the aforestated property by San Antonio De Padua De Maligaya Homeowners Association, Inc. under CMP is a bona fide transaction and qualifies for Capital Gains Tax incentive provided in Section 32 (b) of RA 7279. 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: (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 properties by Sps. Paulino M. Paredes, Jr. and Eliza Echiverri Paredes to San Antonio De Padua De Maligaya Homeowners Association, Inc. 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, Sps. Paulino M. Paredes, Jr. and Eliza Echiverri Paredes are 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 realty or its fair market value determined in accordance with Section 6 (E) of the said Code, whichever is higher. STcAIa 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 P150,000.00 or P180,000.00 as the case may be, for each qualified beneficiaries (now P400,000.00 per issuance of 1-2008 dated December 11, 2008 wherein it further adjusted the socialized housing package for each qualified beneficiaries). 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, 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 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 San Antonio De Padua De Maligaya 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) 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