BIR Ruling [DA-110-03]

April 8, 2003 BIR RULING [DA-110-03] 24 (D) (1); DA 154-2000 Dionisio Condominium Homeowners' Association, Inc. No. 850 Luzon Street Tondo, Manila Attention: Mr. Mario Tan President Gentlemen : This refers to your letter dated January 6, 2003 stating that the Dionisio Condominium, a six storey commercial building was built by Mr. And Mrs. Giok Hian Dionisio (Spouses Dionisio) in 1977; that it was intended as family residence, while some units were rented; that sometime in 1988, Spouses Dionisio converted the building into a condominium; that during the conversion the engineer who prepared the building floor plans used his own direction without consulting the actual numbering of the units existing; that the developers failed to notice the errors in the numbering of the units from second to sixth floors in the floor plans; that when they sold some condominium units, they transferred the Condominium Certificates of Title (CCTs) to the buyers based on the actual existing numbering of the units and not according to the floor plans; that in order to correct the said error, the unit owners decided to execute a Deed of Exchange; that on December 21, 2002, two (2) separate Deeds of Exchange were executed by the unit owners: First Deed of Exchange Spouses William and Juliet Uy (Spouses Uy) and Spouses Judy Yun Ong Co and Co Yu Pue (Spouses Co) are the respective owners of Unit 501 and Unit 504 located on the fifth floor of Dionisio Condominium covered by CCT Nos. 9171 and 32049 containing floor area of 69.50 square meters and 72.00 square meters, respectively. Second Deed of Exchange Spouses Co and Spouses Wheeler Ty and Tsang Yuen Yu are the respective owners of Unit 503 and Unit 502 located on the fifth floor of Dionisio Condominium covered by TCT Nos. 9235 and 10066 containing floor area of 73.00 square meters and 70.30 square meters, respectively. In connection therewith, you now request for exemption from the payment of capital gains tax and documentary stamp tax relative to the Deeds of Exchange executed by the above-named spouses involving the condominium units in Dionisio Condominium. In reply thereto, please be informed that since the exchange transactions are without monetary consideration, and considering further that the execution of the Deeds of Exchange is merely for the purpose of correcting the mistake committed by the engineer who drew the floor plans and which the developers failed to notice, the exchange of the condominium units covered by CCT Nos. 9171, 32049, 9235 and 10066 is not subject to the capital gains tax imposed under Section 24(D)(1) of the Tax Code of 1997, nor to the creditable withholding tax prescribed in Revenue Regulations No. 2-98, as amended. Moreover, the said exchanges are likewise not subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. However, the notarial acknowledgment of the said deed is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the said Code. ( BIR Ruling No. DA145-2000 dated March 10, 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. aATHES Very truly yours, (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service