BIR Ruling [DA-012-01]

February 12, 2001 BIR RULING [DA-012-01] R.A. 4726; 27 57 (B); 188 DA-305-2000 Ocampo & Ocampo 11th Floor, Equitable Bank Tower Bldg. 8751 Paseo de Roxas Avenue Makati City Attention: Atty . Miguelito V . Ocampo Partner Gentlemen : This refers to your letter dated December 20, 2000 requesting, on behalf of your client UCPB Properties, Inc., ("UPI") for a confirmation of your opinion that the conveyance or transfer of the common areas, including the land on which the condominium project is built known as The Forbes Tower Condominium Project ("Condominium Project") by UPI in favor of the Forbes Tower Condominium Corporation (Condominium Corporation), is exempt from the payment of income tax, creditable withholding tax, capital gains tax, documentary stamp tax and value added tax. It is represented that UPI, a domestic corporation, is the registered owner of three (3) parcels of land located at Valero St., Salcedo Village, Makati City, Metro Manila, with an aggregate area of Two Thousand Nine Hundred Forty Nine (2,949) square meters more or less, covered by Transfer Certificates of Title Nos. 205650, 205651 and 205652 (collectively referred to hereinafter as the "Land") of the Registry of Deeds for Makati City where the condominium project known as the Forbes Tower Condominium Project was constructed; that UPI, in accordance with the provisions of Republic Act No. 4726, otherwise known as the Condominium Act (R.A. 4726), developed and established the Condominium Project upon the Land; that on the other hand, the Condominium Corporation is a non-stock, non-profit corporation formed and organized pursuant to the Condominium Act, Batas Pambansa Blg. 68, otherwise known as the Corporation Code of the Philippines and Master Deed 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; and that a Deed of Transfer was executed by and between UPI and the Forbes Tower Condominium Corporation, whereby the former shall cede, convey or transfer in favor of the latter its ownership as well as its interests, rights and title to the common areas without any monetary or financial consideration, in compliance with the provisions of the Condominium Act, Corporation Code and Master Deed. In reply, please be informed that since the Deed of Transfer above-mentioned is without any monetary consideration and is not in connection with a sale made to the condominium corporation, no income was generated and a fortiori , no creditable withholding tax is payable and collectible. The purpose of the conveyance to the condominium corporation is for purposes of management of the 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 conveying the common areas of the condominium project to the Forbes Tower Condominium is not subject to the creditable withholding tax prescribed by Revenue Regulations No. 2-98, implementing Section 57(B) in relation to Section 27 of the Tax Code of 1997. Neither is it subject to the documentary stamp tax nor value-added-tax imposed under Section 196 and 105, both of the same Code. However, the notarial acknowledgment 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) CSaHDT This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) LILIAN B. HEFTI Deputy Commissioner Legal & Inspection Group