BIR Ruling [DA-086-99]

February 11, 1999 BIR RULING [DA-086-99] DMC Urban Property Developers, Inc. 2/F, 2281 Pasong Tamo Extension Makati City Attention: Atty . Romulo D . San Juan In-House Counsel Gentlemen : This refers to your letter dated November 11, 1998 stating that DMC Urban Property Developers, Inc. (UPDI) is the owner of two (2) parcels of land at the corner of Medina and Pierce Streets in Makati City; that sometime in 1983, UPDI constructed a two-storey building thereon consisting of eight (8) independent condominium units known as "Pierce Condominium Project"; that pursuant to the provisions of the Condominium Law (R.A. 4726), UPDI incorporated and organized Pierce Condominium Corporation (PCC), a non-stock, non-profit corporation that will own and manage the land and the common areas of the building; that also, pursuant to the said law, the two (2) parcels of land together with the common areas of the condominium project were subsequently assigned to PCC under and by virtue of a Deed of Assignment dated October 16, 1984; that in addition, however, to the land and the common areas, among those included in the transfer by virtue of the Deed of Assignment were the individual condominium units which were subsequently registered in the name of PCC; that the transfer of the individual units to PCC was obviously a mistake because what were intended to be transferred to the condominium corporation (PCC) were the parcels of land and the common areas of the project only and not the individual units which should remain with the owner-developer (UPDI) ; that in order to rectify the error, PCC has executed a Deed of Reconveyance to return/reconvey the individual units to its rightful owner, UPDI; that although the titles to the units are in the name of PCC, it is still UPDI that is paying the real property taxes thereon every year up to the present; and that the reconveyance is only being done now because the mistake was only discovered after UPDI's management decided recently to sell the units. Based on the foregoing, you now in effect request for a ruling whether or not the Deed of Reconveyance is subject to creditable withholding tax and/or documentary stamp tax. In reply, please be informed that since the Deed of Reconveyance transferring and conveying the realty in question in favor of its owner, UPDI is merely to correct a mistake and without any monetary consideration, this Office is of the opinion as it hereby holds that the same is not subject to income tax and, consequently, to the creditable withholding tax prescribed under Revenue Regulations No. 2-98. Moreover, the Deed of Reconveyance effecting the transfer of said realty in favor of UPDI as the owner is not likewise subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. However, the said Deed shall be subject only to the documentary stamp tax of P15.00 imposed under Section 188 of the Tax Code of 1997. (BIR Ruling No. 178-94 dated December 14, 1994) 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. llcd Very truly yours, Commissioner of Internal Revenue By: (SGD. SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)