BIR Ruling [DA-007-02]

January 18, 2002 BIR RULING [DA-007-02] S.27; 57 (B); 188 DA-305-2000/2-24-01 Bariz Realty, Inc . 226 Ortigas Avenue, Greenhills San Juan Metro Manila Attention: Gov . Justo M . Ortiz President Gentlemen : This refers to your letter dated February 20, 2001 requesting for a ruling as to whether the transfer and conveyance of the common areas of the condominium project known as RICHBELT TOWER CONDOMINIUM including the land on which it stands by BATIZ REALTY, INC . to RICHBELT TOWER CONDOMINIUM CORPORATION as required by Republic Act No. 4726, otherwise known as the Condominium Act and in accordance with the terms, conditions and restrictions provided in the Master's Deed with Declaration of Restriction of RICHBELT TOWER CONDOMINIUM dated January 25, 1988, is exempt from the payment of income tax, creditable withholding tax, capital gains tax and documentary stamp tax, as prescribed under Section 27, 196 and 188 of the Tax Code of 1997. BATIZ REALTY, INC . (BATIZ) is a domestic corporation organized and existing under and by virtue of the laws of the Philippines. It is the owner-developer of a parcel of land situated in San Juan, Metro Manila covered by Transfer Certificate of Title No. 58932 of the Register of Deeds for Metro Manila District II. It developed and established the RICHBELT TOWER CONDOMINIUM in accordance with the provisions of Republic Act No. 4726, otherwise known as the Condominium Act and in accordance with the terms, conditions, and restrictions provided for in the Master Deed with Declaration of Restriction of RICHBELT TOWER CONDOMINIUM dated January 25, 1988. RICHBELT TOWER CONDOMINIUM CORPORATION, (RICHBELT) was formed and organized pursuant to Condominium Act and the Corporation Code of the Philippines for the purpose of holding title or owning the common areas as defined in the Master Deed including the land upon which the Condominium project has been developed or established. To comply with the provision of the Condominium Act, Corporate Code and Master Deed, BATIZ will execute a Deed of Transfer/Conveyance to cede, convey find transfer its title to the land and the common areas in favor of RICHBELT, the Condominium Corporation, without any consideration. In support of our request, you submitted the following documents: (1) Deed of Transfer/Conveyance; (2) Articles of Incorporation of Batiz Realty, Inc.; (3) Articles of Incorporation of Richbelt Tower Condominium Corporation; (4) Master Deed with Declaration of Restriction of Richbelt Tower Condominium; (5) Transfer Certificate of Title No. 58932. In reply, please be informed that since the Deed of Transfer/Conveyance abovementioned is without consideration and is not in connection with a sale made to the Condominium Corporation, no income was generated, and a fortiori , no income tax, capital gains tax, or creditable withholding tax is payable and collectible. The purpose of the conveyance to the Condominium Corporation is for the management of the Condominium Project for the common benefit of the unit-owners pursuant to Section 10 of R.A. 4726 , otherwise known as the Condominium Act. In view thereof, this Office is of the opinion as it hereby holds that the aforesaid Deed of Transfer/Conveyance is not subject to income tax, capital gains tax, or creditable withholding tax prescribed by Revenue Regulations No. 2-98, implementing Section 57(13) in relation to Section 27 of the Tax Code of 1997. Neither is it subject to the documentary stamp tax imposed under Section 196 of the same Code. However, the notarial acknowledgement to said Deed of Transfer is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the Tax Code of 1997. (BIR Ruling No. DA-305-2000 dated February 24, 2000). 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 null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) MILAGROS V. REGALADO Acting Assistant Commissioner Legal Service