Guidelines on the Adoption of Philippine Financial Reporting Standard (PFRS) 9 — Financial Instruments and Financial Reporting Package for Non-Stock Savings and Loan Associations (FRPNSSLA)

November 19, 2010 BIR RULING NO. 122-10 RA 7279; BIR Ruling No. 374-92; BIR Ruling No. [SH-(012)052-2010] Office of the City Mayor City Engineering Department Housing Development Division City of Puerto Princesa, Palawan Attention: Mr. Javier P. Quindoza Officer-in-Charge Gentlemen : This refers to your letter dated May 24, 2010, received by our Office on June 11, 2010, requesting for exemption from the payment of capital gains tax on the sale of a parcel of land pursuant to Republic Act (RA) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992." DTAHEC The documents submitted disclosed that the subject property with Transfer Certificate of Title No. 182078 with a total area of 34,422 square meters, more or less, located at Barangay Sta. Lourdes, Puerto Princesa City and registered under the name of Cesar B. Queao, Jr. with Taxpayer Identification Number (TIN) 302-647-280, was sold to the City Government of Puerto Princesa, represented by City Mayor Edward S. Hagedorn; that the subject property is intended for the continuing effort of the city government to provide the needed assistance to its underprivileged constituents under the socialized housing project; and that a Deed of Absolute Sale was executed dated May 27, 2010. In reply, please be informed that pursuant to Section 20 of RA 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: xxx xxx xxx (1) Capital gains tax on raw lands used for the project; xxx xxx xxx" the owners of the raw land are exempt from the payment of capital gains tax or the withholding tax under Revenue Regulations No. 12-98 on the conveyance of the parcel of land for use in the aforesaid socialized housing project. Upon application for exemption, a lien on the title of the land shall be annotated by the Register of Deeds having jurisdiction over the property, to the effect that the same are to be applied or are being applied to socialized housing project pursuant to RA No. 7279. However, the sale is subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997 based on the consideration considering that one of the contracting parties is the Government. (BIR Ruling No. 374-92 dated December 28, 1992 and BIR Ruling No. [SH-(012) 052-2010] dated June 22, 2010) TcADCI Any sale made by the City Government of Puerto Princesa to interested parties other than the principal target beneficiaries under Sections 3 (t) and 16 of RA 7279 shall not be entitled to the foregoing tax exemption. Please take note that this ruling is never intended and shall not be construed as giving authority to the concerned Register of Deeds to effect transfer of the land in the name of the buyer without the necessary certificate of authority to register issued by this Bureau. In this regard, this ruling shall be presented to the Revenue District Office (RDO) concerned in order for the latter to issue the Certificate Authorizing Registration (CAR) after the submission of the requirement provided under RMO 15-2003, including proof of payment of documentary stamp tax. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon verification, it will be disclosed that the facts are different, then this ruling shall be considered as null and void. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue