BIR Ruling No. 312-2016

BUREAU OFINTERNALREVENUE REPURLICOFTHE PHILIPPINES DEPARTMENT OF FINANCE

Quezon City

RA7279 000-00 312-2016 Person to Contact: Chief, Law Division Tel. Nos. 926-55-36/927-09-63

Date: June 28, 2016

FIRST RGPLAND DEVELOPMENT CORPORATION 1211 Cityland 10 Towerl,Ayala Avenue,corner H.V.De La Costa Street

Gentlemen: Attention:RESTITUTO G.PEREZ,JR. Chairman

Finance Corporation SHFC dated November 18. 2014, endorsing the sale transaction between First RGP Land Development Corporation and SHFC for This refers to the letter of Ma. Ana R. Oliveros, President of Social Housing

exemption from the payment of Capital Gains Tax and other taxes in accordance with

Development and Housing Act of 1992 Section 32(b) of the Republic Act (RA) No.7279,otherwise known as theUrban

registered owner of the following parcels of land covered by thirty two (32) Transfer Certificates of TitleTCT located at Brgy.Timalan.Naic.Cavite,to wit Documents submitted show First RGP Land Development Corporation are the

TCT Lot Block Area (sq. m.) 1 6 4 1.000

1 10 5 7 8 9 c 3 10 12 16 7 11 14 15 8 9 4 4 4 4 4 4 4 4 4 4 L 2.006 1.650 1.000 1.631 1.000 1.000 1.000 1.000 1,000 1.000

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South Morning View Homeowners Association, Inc. #312-2016 6-28-2016

Page 2 of 5

12 2 232 13 14 15 16 20 1 18 19 21 23 5-A 10 12 11 13 14 1 1 8 9 3 4 5 1 1 1 8 8 1 1 1.713 2.090 3,335 1,785 1.800 1.908 2,839 1,481 1,865 1,882 1.544 1.576 961

6 1 8 1.550 1,538

2333 2 10 9 8 1,408 1.862

11 8 1.305

12 8 1.670

32 13 14 Total 8 8 51,266 2,378 1.489

SHFC (TIN on the other hand, is a government-owned and

controlled corporation created under Executive Order (EO No.272 Series of 2004.

On November 13,2014,the parties exccuted a Deed of Absolute Sale whereby the landowners transferred and conveyed the subiect properties to SHFC at an agreed

price of

provisions of RA Nos.8974 and 7279 for the housing project of South Morning Pesos SHFC is buying the property pursuant tothe

View Homeowners Association, Inc., a homcowner's organization duly registered with the Housing and Land Use Regulatory Board (HLURB) under Registration No. 20216. Pursuant to the Certification issued by SHFC.the subject properties were acquired by SHFC for South Morning View Homeowners Association, Inc.covered

by TCT Nos.

living along waterways and danger zones in Metro Manila and provide them with in- Program, where the SHFC is taskcd to implement this through its High Density Housing (HDH Program.The purpose of the program is to relocate ISFs who are 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 under an allocated funding for the ISF Housug

South Morning View Homeowners Association, Inc. Page 3of5 #31-2016 628016

Program (CMP) where community loans are given for land acquisition as well as site purpose, South Morning View Homeowners Association, Inc. secured a housing loan under the Informal Settler Families (ISF) Housing Program from SHFC. development and housing construction for the Informal Settler Families (ISF.For this

In reply.please be informed that Section 32 of RA No.7279 provides

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

a Government-owned or -controlled corporations and local prices based on acquisition cost plus financial carrying costs: government units, may dispose of their idle lands suitable for socialized housing under the CMP through negotiable sale at

(b) Property sold under the CMP shall be exempted from the capitul 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 payments of amortizations for three (3) months

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 In this particular HDH scheme which SHFC described as modified CMP

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

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

construction'.

Considering that the acquisition of the parcels of land by SHFC from First RGP Land Development Corporation 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

Sec.15.Policy.-Socialized housing.as defined in Section 3 hereof. shall be the primary strategy in providing shelter for the underprivileged and homeless. However. if the tenurial arrangement

SHFC Secretary's Cerificate dated August 12014 Undated Usufruct Agreement 042401

South Morning View Homeowners Association Inc 4206 622016

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in_a particuar socialized housing_programisin thenature_of leasehotdorusufructthesame_shallbetransitoryandthe heneficiaries_must be encouraged to become_independent from the Program within a given period of time.to he determined hy the

implementing agency concerned.(emphasis supplied)

In the case of South Morning View Homeowners Association, Inc., a 50-year Usufruct Agreement with option to buy was executed by SHFC and the South Morning View Homeowners Association, Inc. It is likewise noted that the Letters of Guaranty were granted not in favor of the South Morning View Homeowners Association, Inc.but for the purchase by SHFC of the property of First RGP Land Development Corporation. The members of the South Morning View 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.

transactions that are entitled to the tax incentives under CMP of Article VIII of RA No.7279.Consequently,the sale by First RGP Land Development Corporation of the subiect pronerties covered by TCT Nos. Therefore, the HDH Scheme, as herein presented, is not among those

of real property that is subject to applicable revenue taxes i.e.CWT/VAT/DST. 51226 shall be treated as ordinary sale

doubt3.In the case of Mactan Cehu International Airport Authority .Marcos+the strictly construed against the taxpayer. Exemptions are never presumed and the burden is upon the taxpayer to establish his right to exemption beyond reasonable Supreme Court held It should be remembered that laws and statutes granting tax exemptions are

Dimaampao,Japar B.Tax Principles and Remedies.Second Edition2005 G.R.No.120082.11 September 1996,261 SCRA 667 042401

South Morning View Homeowners Association. Inc. #313016 62016

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"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 taxpaver

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 he 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 First RGP Land Development Corporation and SHFC in

accordance with Section 32(b) of RA No.7279 for lack of legal basis.

Very truly yours.

KIM S.JACINTO-HENARES Commissioner of Internal Revenue K-1-JRC 042401

JUN 2 7 2016