BIR Ruling No. 313-2016

REPUBLICOFTHE PHILIPPINES

DEPARTMENT OF FINANCE BUREAU OFINTERNALREVENUE

Quezon City

RA7279 [ 000-00 313-2016 Person to Contact: Chief, Law Division Tel. Nos. 926-55-36/ 927-09-63

Date: _ June 28, 2016

SAMUEL B.UY

227 Rizal Avenue Extension,Grace Park,Caloocan City Pablo Bairan Sr.Bldg

Si:

This refers to the letter of Ma. Ana R. Oliveros, President of Social Housing Finance Corporation (SHFC dated August 3,2015,endorsing the sale transaction

between Samuel B.Uy.et al..and SHFC for exemption from the payment of Capital

Gains Tax and other taxes in accordance with Section 32(b of the Republic Act (RA

No. 7279, otherwise known as the Urban Development and Housing Act of 1992

Documents submitted show that Samuel B. Uy. Jane Uy, Annie B. Uy. Fernando B.UyWilson B. Uy,Winston B.Uy and Enrique B.Uy (hereinafter

located at Balintawak Subd., Brgy.175,Caloocan City,to wit referred to as Landowner) are the registered owner of the following parcels of land

TCT Lot Block Area (sq. m.)

3 8 180 7375 4 8 1 0

5 8 180 6 8 10

2 1 0

8 8 180 C 9 8 180

10 8 180 11 8 180 12 8 1 80

C 13 8 180

14 8 10 15 180 11 180

04246

Kapitbahayan Blue Meadows Homeowners Association, Inc. 313-2013 6282016

Page 2 of's

1 8 180

1 8 180

19 8 180 20 1 80

10 21 8 180

2 8 180

1 23 24 8 8 180 1 80

25 8 180

26 8 180

27 8 205

28 8 205

3 1 9 220

2 3 9 0 20 180

14 4 9 180

5 9 180

1L 1 9 9 180 180

8 9 10

9 9 180

16 10 9 1 80

1 9 180

12 9 80

17 13 9 0

14 9 1 80

15 9 180

11 9 10

18 17 9 180

18 9 180 19 9 1 80 20 9 180 21 9 1 80 19 22 23 24 9 9 9 180 180 180

25 9 180

20 26 9 1 80

2 9 20 2 9 205

Total Area 9900

SHFC TIN 241-628-229-000.on the other hand.is a government-owned and controlled corporation created under Executive Order (EO No.272 Series of 2004

H042406

Page 3 of 5 Kapitbahayan Blue Meadows Homeowners Association,Inc #313-2013 6282016

On March 18.2015.the parties executed a Deed of Absolute Sale whereby the landowners transferred and conveyed the subject properties to SHFC at an agreed price of ? Pesos SHFC is buying the property pursuant to the provisions ot RA Nos.8974 and 7279 for the housing project of Kapitbahayan Blue Meadows Homeowners Association. Inc,.a homeowner's organization duly registered with

the Housing and Land Use Regulatory Board (HLURB under Registration No

Pursuant to the Certification issued by SHFC. the subject properties were acquired by SHFC for Kapitbahayan Blue Meadows Homeowners Association,Inc.

covered bvTCT Nos

(

under an allocated

through its High Density Housing (HDH Program. The purpose of the program is to relocate ISFs who are living along waterways and danger zones in Metro Manila and funding for the ISF Housing Program, where the SHFC is tasked to implement this provide them with in-city or near-city relocation. The acquisition by SHFC of said

property shall be under its High Density Housing (HDH Program. a modified Community Mortgage Program (CMP) where community loans are given for land acquisition as well as site development and housing construction for the Informal Settler Families ISF.For this purpose,Kapitbahayan Blue Meadows Homeowners

Association Inc.secured a housing loan under the Informal Settler Families (ISF

Housing Program from SHFC.

In replyplease be informed that Section 32 of RA No.7279 provides:

participants in the CMP shall be granted with the following privileges Sec. 32. Incentives.- To encourage its wider implementation

or incentives:

a Government-owned or-controlled corporationsandlocal

government units. may dispose of their idle lands suitable for

socialized housing under the CMP through negotiable sale at prices based on acquisition cost plus financial carrying costs:

(b Property sold under the CMP shall he exempted from the capital

gains tax; and

(c) Beneficiaries under the CMP shall not be evicted nor dispossessed

of their lands or improvements unless they have incurred

arrangements in pavments of amortizations for three(3) months.

In this particular HDH scheme which SHFC described as modified CMP SHFC buys the land identified for socialized housing with a funding to be drawn out of the ISF Housing Fund to be released by the Department of Budget and

Management.The ISF's member beneficiary/relocatee then enters into a Usufruct

Agreement (with option to buy on the land with SHFC and from whom he may take out a community loan for land acquisition site development and building construetion".

Usufruct Agrecment dated January23,2015 SHFC Sccretary's Certificate dated August 1.2014 042406

Page 4 of 5 Kapitbahayan Blue Meadows Homeowners' Association, Inc 332013 622016

Considering that the acquisition of the parcels of land by SHFC from Samuel B. Uyet al. is not under CMP.hence,it is not qualified for exemption from capital gains tax under Section 32 of RA 7279.

Note that the CMP is a mortgage financing program of the National Home

Mortgage Finance Corporation which assists legally organized associations of

underprivileged and homeless citizens to purchase and develop a tract of land under

the concept of community ownership.The primary object of the program is to assist

residents of blighted or depressed areas to own the lots they occupy.or where they

choose to relocate to, and eventually improve their neighborhood and homes to the

extent of their affordability.Sec.31,RA 7279

Moreover, Section 15 of the same RA provides that

hereof. shall be the primary strategy in providing shelter for the Sec.15. Policy.-Socialized housing. as defined in Section 3

underprivileged and homeless. However, if the tenurial arrangement in a_particular socialized housing_program is in the nature of leasehold or usufruct. the same shall be transitory and the

beneficiaries must be encouraged to become independent from the

Program within a given period of time, to be determined by the

implementing agency concerned. (emphasis supplied)

In the case of Kapitbahayan Blue Meadows Homeowners Association, Inc., a

50-year Usufruct Agreement with option to buy was executed by SHFC and the

Kapitbahayan Blue Meadows Homeowners' Association, Inc.It is likewise noted that

the Letters of Guaranty were granted not in favor of the Kapitbahayan Blue Meadows

Homeowners Association, Inc.but for the purchase by SHFC of the property of

Samuel B. Uy, et al.. The members of the Kapitbahayan Blue Meadows

Homeowners' Association, Inc. are only given an option to buy the units that will be

allotted to them. otherwise, they must surrender the same at the end of 50-year usufruct period, Section 32 therefore does not apply in this case. The concept and primary objective of the CMP are absent in the transaction.

Moreover, as a socialized housing strategy under usufruct, the possession of the housing unit is considered temporary and the beneficiary should be encouraged to

own the housing unit within a given period of time.

In this case,although the HDH program provides for a time-barred usufruct.

the agreement only presents the relocatee/beneficiary an option to buy the housing unit within the usufruct period or else he must surrender the same at the end of the

usufruct period.The usufruct agreement also states that the same shall be executed for

projects where ISFs cannot afford to buy the land, as determined by the owner, or do not opt to buy the land.

Therefore, the HDH Scheme, as herein presented, is not among those transactions that are entitled to the tax incentives under CMP of Article VIII of RA

No.7279.Consequently.the sale by Samuel B.Uy,et al.of the subject properties covered by TCT Nos.

Kapitbahayan Blue Meadows Homeowners' Association, Inc. #3133013 62-20:6

Page 5 of 5

and shall be treated as

ordinary sale of real property that is subject to applicable revenue taxes i.e.CWT/

VAT/DST.

It should be remembered that laws and statutes granting tax exemptions are

strictly construed against the taxpayer. Exemptions are never presumed and the

burden is upon the taxpayer to establish his right to exemption beyond reasonable

doubt3.In the case of Mactan Cebu International Airport Authority v. Marcos.the

Supreme Court held:

"Accordingly, tax statutes must be construed strictly against the

government and liberally in favor of the taxpayer. But since taxes are

what we pay for civilized society, or are the lifeblood of the nation, the

law frowns against exemptions from taxation and statutes granting the

exemptions are thus construed strictissimi juris against the taxpayer

and liberally in favor of the taxing authority. A claim of exemption

from tax payments must be clearly shown and based on language in the

law too plain to be mistaken. Elsewise stated, taxation is the rule.

exemption therefrom is the exception. "

In view of the foregoing, this Office regrets to deny your request for

exemption from the payment of Capital Gains Tax and other taxes of the sale

transaction between Samuel B.Uy,et al.and SHFC in accordance with Section 32(b)

of RA No.7279 for lack of legal basis.

Very truly yours.

KIM S.JACINTO-HENARES

K-1-JRC Commissioner of Internal Revenue 0.4 4 9.

Dimaampao.Japar B.Tax Principles and Remedies,Second Edition 2005 G.R.No.120082,11 September 1996.261 SCRA 667