BIR Ruling [UN-153-95]

April 11, 1995 BIR RULING [UN-153-95] Samahang Maralita ng Cristobal, Inc. Cristobal St., Paco, Manila Attention: Mrs . Angelita Robles President Gentlemen : This refers to your request for a ruling that the sale of the real property of the Philippine Tobacco Flue-Curing and Redrying Corporation located at 14 Cristobal Street, Paco, Manila, to the Samahang Maralita ng Cristobal, Inc. (SMCI), a non-stock, non-profit community organization duly registered with the Securities and Exchange Commission (SEC) is exempt from capital gains tax pursuant to Section 32(a) and (b) of R. A. 7279 which was approved on March 24, 1992 and published in the March 28, 1992 issue of the Philippine Times Journal and Malaya, newspapers of general circulation. It appears that the Group Land Acquisition and Development Program (GLAD) is a mortgage financing program of the Pag-IBIG FUND which assists legally organized associations of underprivileged and homeless citizens to purchase and develop a tract of land under the concept of community ownership; that through a Letter Guaranty by said agency, the landowner executes a Deed of Sale to the Association which stands as the borrower and debtor to the extent of the total amount paid by Pag-IBIG FUND to the landowner; and that in the instant case, the property being sold to SMCI is covered by Transfer Certificate of Title No. 48483. Field verification and ocular inspection conducted in this case disclosed that the above-mentioned property is fully occupied by 134 qualified beneficiaries and 47 other non-qualified tenants ; that the area is divided into 138 lots whose areas ranges from 20 up to 37 square meters; that two (2) lots were allotted for the chapel and multi-purpose hall. To that effect, Revenue Officer, Armando F. Tria recommended favorable action on the request. Said recommendation was concurred by Revenue District Officer Isidro B. Tecson, Jr. of Revenue District No. 34. In reply, please be informed that pursuant to Section 32 of R. A. No. 7279, pertinent portion of which reads: "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 xxx xxx xxx" the landowner which sells its property to the association pursuant to the Community Mortgage is exempt from the payment of capital gains tax and from the expanded withholding tax under Revenue Regulations No. 1-90. Such being the case, the sale to SMCI is exempt from the capital gains tax and the expanded withholding tax as far as the 134 qualified beneficiaries are concerned . Upon issuance of this letter of exemption, and upon registration of the document of sale, a lien on the Certificate of Title of the land to be issued in the name of SMCI shall be caused to be annotated by the Register of Deeds having jurisdiction over the property, to the effect, that the said property shall be used for socialized housing pursuant to R. A. 7279. However, it is observed that documentary stamp tax is not one of the taxes covered by the tax exemption clause under Sections 20 and 32 of R. A. 7279. Such being the case, the landowner, is liable to pay the documentary stamp tax on the document conveying the property to the association under the CMP as imposed under Sec. 198 of the Tax Code, as amended, based on the actual consideration paid by the association to the landowner. (BIR Rulings No. CMP-078-95 dated March 21, 1995) cdtech Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service) By: ALICIA L. TOMACRUZ Head Rev. Executive Assistant Legal Service