BIR Ruling [DA-105-01]

June 1, 2001 BIR RULING [DA-105-01] R.A. 4726; 57 (B); 188 DA-122-2000 Pastelero Law Office E-1503-B Philippine Stock Exchange Centre, Exchange Road, Pasig City Metro Manila Attention: Fidel R . Racasa Gentlemen : This refers to your letter which was received by this Office on October 23, 2000 requesting on behalf of your client, Philippine Stock Exchange Centre Condominium Corporation (PSECCC), for exemption from the payment of creditable withholding tax, transfer tax, documentary stamp tax and other taxes relatives to the conveyance of the common areas of Philippine Realty & Holdings Corporation (PHILREALTY) in favor of PSECCC. It is represented that Philippine Realty & Holdings Corporation is the registered owner and developer of Philippine Stock Exchange Centre (PSE Centre); that PSECCC, a non-stock, non-profit corporation with SEC Registration No. 173963 dated February 14, 1997, holds the title and ownership over the common areas and facilities of the PSE Centre; that PSECCC caused the cancellation of thirty-three (33) condominium certificates of title (CCTs) before the Registry of Deeds of Pasig City issued in the name of PHILREALTY over the common areas and facilities of the PSE Centre, formerly known as Tektite Towers; that after the initial investigation of the records, PSECCC discovered that of the thirty-three (33) common areas located at the basement levels, thirty-two (32) are used as elevator shafts and one (1) is used as PSECCC's maintenance room; that the thirty-three (33) CCT's are registered in the name of PHILREALTY; that PHILREALTY voluntarily executed a Deed of Conveyance over said units in favor of PSECCC to facilitate the cancellation of the CCT's issued in its name and the subsequent transfer thereof in the name of PSECCC, since the said areas are common in nature; that inasmuch as the value of the common areas and facilities in the condominium project have already been included in the purchase price of the units sold to unit owners/members of PSECCC, these common areas and facilities cannot be sold separately; that the transfer of the common areas and facilities thereof in favor of PSECCC would be a mere formality to finally effect the transfer of title thereto; that pursuant to the provisions of Republic Act No. 4726, otherwise known as the Condominium Act and in accordance with the Master Deed and Declaration of Restrictions, PSECCC was organized for the purpose of managing, holding title to, and maintaining all the common areas in the condominium building including the land on which said condominium is located. In reply, please be informed that since the Deed of Conveyance above-mentioned was made without consideration and is not in connection with a sale made to the condominium corporation, no taxable income will be 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. In view thereof, this Office is of the opinion as it hereby holds that the aforesaid Deed of Conveyance transferring the common areas of PHILREALTY's condominium project in favor of PSECCC is not subject to the creditable withholding tax under Section 57(B) 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 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. (BIR Ruling No. DA-122-2000 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 disclosed that the facts are different, then this ruling shall be considered null and void. TaDAIS Very truly yours, Commissioner of Internal Revenue By: (SGD.) MILAGROS V. REGALADO Acting Assistant Commissioner Legal Service