Rules and Regulations Implementing Certain Provisions of the Philippine Cooperative Code of 2008

January 11, 2013 BIR RULING NO. 018-13 RA No. 7279; BIR Ruling No. 130-10; BIR Ruling No. 040-10 Villa Santibanez Homeowners Association, Inc. Purok Paho, Puentebella Subd. Brgy. Taculing, Bacolod City Attention: Jerrey G. Sajona President Gentlemen : This refers to your letter dated March 15, 2012, received by this Office on March 26, 2012, requesting exemption from the payment of Capital Gains Tax and other taxes on the sale of real property by the Intestate Estate of Fidelidad J. Santibanez in favor of Villa Santibanez Homeowners Association, Inc. in accordance with the Republic Act No. 7279, otherwise known as the Urban Development and Housing Act of 1992. DCSETa It appears that Fidelidad J. Santibanez married to Efraim Santibanez is the registered owner of parcels of land covered by two (2) Transfer Certificates of Title, to wit: TCT No. Area (sq.m.) Property Index No. T-6627 1,024 143-00-058-19-280 T-6628 1,000 143-00-058-19-279 issued by the Registry of Deeds for Bacolod City. The aforesaid properties are situated at Brgy. Taculing, Bacolod City Villa Santibanez Homeowners Association, Inc., on the other hand, is a homeowner's organization registered with the Housing and Land Use Regulatory Board (HLURB) with Tax Identification No. 006-262-343-000. On November 4, 2011, Intestate Estate of Fidelidad J. Santibanez, through its Judicial Administratrix, Florence S. Ariola, executed a Deed of Absolute Sale whereby the Judicial Administratrix transfers and conveys the subject properties to Villa Santibanez Homeowners Association, Inc. at an agreed price of One Million Two Hundred Fourteen Thousand Four Hundred Pesos (P1,214,400.00). Pursuant to a certification issued by Social Housing Finance Corporation, the properties covered by TCTs No/s. T-6627 and T-6628 constitute a CMP Project and shall be proportionately distributed to the association's twenty five (25) qualified member-beneficiaries. 1 For this purpose, Villa Santibanez Homeowners Association, Inc. secured a housing loan under the Community Mortgage Program (CMP), a financing assistance program of the Social Housing Finance Corporation (SHFC) a subsidiary of the National Home Mortgage Finance Corporation (NHMFC). Moreover, on December 16, 2010, 2 the Regional Trial Court of Iloilo City Branch 28 rendered its decision in SPL. PROC. No. 8692 entitled In The Matter of the Testate Estate of the Late Spouses Efraim and Fidelidad Santibanez, approving, in toto, the Compromise Agreement entered into by and between the heirs, a portion of which states that: "With respect to the two (2) residential lots situated at Purok Paho, Fuentebella Subdivision, Bacolod City covered by TCTs No/s. T-6627 and T-6628 which is the subject of the motion to approve Deed of Absolute Sale dated April 20, 2007, the Court hereby approves the sale of the said lot to Villa Santibaez Homeowners Association, Inc.. The Deed of Absolute Sale between the Intestate Estate of Fidelidad J. Santibaez to Villa Santibaez Homeowners Association, Inc. dated is hereby approved." Lastly, on May 27, 1996, Sonia L. Flores, Chief of the Assessment of Revenue Region No. 11 Iloilo City issued Certifications No. 00628 and 00629, certifying that the estates of the late Efraim Santibaez who died on February 16, 1981 and Fidelidad Santibaez who died on October 1, 1968 have fully paid the estate tax. 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 the owner to Villa Santibanez Homeowners Association, Inc., is exempt from the 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 lands to be issued in the name of the Homeowners 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 pursuant to R.A. No. 7279. (BIR Ruling No. 130-10 dated December 1, 2010) However, the documentary stamp tax is not one of the taxes covered by the tax exemption clause in Secs. 20 and 32 of RA 7279. Accordingly, the owner is liable to pay the documentary stamp tax on the document conveying the afore-stated properties imposed under Section 196 of the Tax Code of 1997, based on the consideration contracted to be paid for such realties or their fair market value determined in accordance with Section 6 (E) of the said Code, whichever is higher. (BIR Ruling No. 130-10 dated December 1, 2010) It is, however, understood 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 title 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). The CAR shall only be issued after the submission of the requirements provided under RMO15-2003. (BIR Ruling No. 040-10 dated August 27, 2010) Notwithstanding the foregoing, the Bureau of Internal Revenue shall conduct verification and post-audit that the actual occupants of the properties transferred under the CMP are qualified beneficiaries and therefore, the seller is entitled to exemption from capital gains tax or income tax imposed under the Tax Code of 1997. On the other hand, the exemption granted under R.A. 7279 is without prejudice to the right of the Government to collect the proper amount of estate tax to the legal heirs pursuant to Section 84 of the Tax Code, as amended. EHaASD 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, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue ANNEX Villa Santibanez Homeowners Association, Inc. Purok Paho, Puentebella Subd. Brgy. Taculing, Bacolod City Name of Beneficiary Blk. No. Lot Total Area No. (sq.m.) 1 ALBARICO, SUSANA A. 1 5 79.35 2 AMIT, LUDEVINA M. 1 11 81.73 3 BIANAN, ANA MARIA D. 1 10 80.53 4 BLANCA, ANGELISA B. 1 4 81.73 5 CABILLOS, MA. MILA P. 1 16 80.53 6 CANETE, PETER B. 2 4 81.73 7 CANTO, IRENE S. 1 12 80.53 8 CASTELLANO, PERLA C. 2 6 80.53 9 CORONEL, RICHARD O. 1 15 80.53 10 DICTO, LIBRADO R. 2 3 82.91 11 DICTO, MARLON R. 2 2 81.73 12 GOMEZ, NELROSE S. 1 1 82.91 13 MACADAGDAG, MARIA RIZOL L. 1 7 80.53 14 MACADAGDAG, MARY ROSE O. 1 9 80.53 15 MAGLANTAY, MILAGROS S. 1 2 80.53 16 MASPIAS, WILLIAM D. 2 7 80.53 17 NAMOL, FERNANDO R. 1 13 80.53 18 NAVARRO, SUZETTE T. 1 3 80.53 19 RUEGO, VIRGILIO T. 1 14 80.53 20 SAJONA, JERRY G. 1 8 80.53 21 SENIER, MARILOU M. 2 5 80.53 22 SIOSAN, EMELITA E. 2 9 80.53 23 SOLOBRICO, ADONILLA D. 2 8 80.53 24 SUMAGAYSAY, ROBERTO P. 2 1 82.91 25 TANLOGON, JOSE ROWIE T. 1 6 80.53 Footnotes 1. see Annex for the masterlist of qualified beneficiaries. 2. Became final and executor on January 21, 2011 per Entry of judgment dated April 11, 2011.