BIR Ruling [UN-197-94]

July 6, 1994 BIR RULING [UN-197-94] Eldigario D. Gonzales #2 Jade Corner Opal Sts. Tierra Verde, Tandang Sora Quezon City S i r : This refers to your letter dated July 4, 1994 requesting for a ruling that the sale of our real properties, situated at Barrio Lumbayao, Mercedes, Zamboanga City, in favor of the El Nio Kapayapaan Urban Poor Association, Inc. (ENKUPAI), to be used in Socialized Housing Project, is exempt from the payment of capital gains tax pursuant to Section 20 of R.A. 7279, otherwise known as the Urban Development and Housing Act of 1992. Records disclosed that the properties (raw land) situated in Barangay Lumbayao, Mercedes, Zamboanga City with an area of 68,404 square meters, covered by Transfer Certificates of Title Nos. T-75,465, T-75,538, and T-77,032 issued by the Register of Deeds of Zamboanga City are the subject of the Deed of Absolute Sale between the owners, Spouses Eldigario D. Gonzales and Ma. Gay M. Gonzales, and the ENKUPAI, represented by its President, Diego D. Rapanut, dated June 29, 1994; that the said properties are intended for Socialized Housing Project as certified by the Housing and Land Use Regulatory Board (HLURB) covered under Development Permit No. 039. In reply, please be informed that pursuant to Section 20 of R.A. No. 7279, pertinent portion of 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: (1) Project-related income taxes; (2) Capital gains tax on raw lands used for the project; xxx xxx xxx" the conveyance of the aforesaid properties covered by Transfer Certificates of Title Nos. T-75,465, T-75,538 and T-77,032 in the name of Eldigario D. Gonzales married to Ma. Gay M. Gonzales, in favor of the ENKUPAI is exempt from the payment of capital gains tax. 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 association 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 project pursuant to R.A. 7279. However, it is observed that documentary stamp tax is not one of the taxes covered by the tax exemption provision in Sec. 20 of R.A. 7279. Such being the case, you shall be liable to pay the documentary stamp tax on the document conveying the properties to the ENKUPAI, imposed under Sec. 196 of the Tax Code, as amended, based on the actual consideration paid by the said association to you. (BIR Ruling 393-93 dated October 1, 1993). cdtech Very truly yours, ALICIA P. CLEMENO Acting Assistant Commissioner (Legal Service)