ASB Realty Corporation

January 16, 2007 BIR RULING [DA-019-07] R.A. No. 4726; DA-178-03; 236-03 ASB Realty Corporation 4th Floor St. Francis Square Doa Julia Vargas Avenue cor. Bank Drive Ortigas Center, Mandaluyong City Attention: Mr. Rolando P. Domingo Senior Vice-President Gentlemen : This refers to your letter dated December 21, 2006 requesting for a confirmation that you are exempted from the payment of income tax/creditable withholding tax and the documentary stamp tax on the transfer of parcel of land and common areas of the condominium project from the developer of the condominium corporation. It is represented that ASB Realty Corporation (ASBRC) is a corporation duly organized and existing under and by virtue of laws of the Philippines; that it is a real estate developer engaged in development of office and residential condominium units; that one of its project is BSA Tower Condominium Project, developed in one (1) parcel of land located at Legaspi Village, Makati City, covered by Transfer Certificate of Title No. 184788 issued by the Register of Deeds of Makati City; that on April 10, 1995, ASBRC executed a Master Deed with Declaration of Restrictions of the BSA Tower Condominium Corporation (BSATCC) and constituted into a condominium project in accordance with Republic Act No. 4726 (Condominium Act); that BSA Tower Condominium Corporation was duly organized as non-profit, non-stock corporation with the purpose of holding title to and managing the common areas of the condominium project; and that a Deed of Conveyance for the transfer of the parcel of land together with all common areas without any consideration and pursuant to law, will be executed between ASBRC , the developer-assignor to BSATCC . In reply, please be informed that since the Deed of Conveyance above-mentioned is without 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 the 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. Moreover, Section 185 of the Revised Documentary Stamp Tax Regulations (Regulations No. 26)provides that "conveyances of realty not in connection with a sale, to trustees or other person without consideration are not taxable." Further, since the conveyance of common areas to BSATCC is without monetary consideration and is not in connection with a sale, it is likewise not subject to VAT imposed under Section 106 of the Tax Code of 1997, as amended, nor to capital gains tax imposed under Section 27 (D) (5) of the Tax Code of 1997, as amended. In view thereof, this Office is of the opinion as it hereby holds that the aforesaid transaction is not subject to the creditable withholding tax prescribed by Section 2.57 (B) of Revenue Regulations No. 2-98, implementing Section 57 (B), in relation to Section 27 of the Tax Code of 1997, as amended. Neither is it subject to the documentary stamp tax imposed under Section 196 of the same Code. However, the notarial acknowledgment to said deed of conveyance is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the Tax Code of 1997, as amended. 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, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service