BIR Ruling [DA-145-03]

May 5, 2003 BIR RULING [DA-145-03] R.A. 4726 DA 419-96 Bright Properties, Inc. U201 SJB Centro Plaza 49 Scout Madrinan Street corner Scout Torillo Street South Triangle, Quezon City Attention: Jesse T. Bustamante President Gentlemen : This refers to your letter dated April 22, 2003 stating that Bright Properties, Inc. is a corporation duly organized and existing under the laws of the Philippines; that it is the owner in fee simple of a parcel of land located at Scout Madrinan Street, Quezon City covered by TCT No. 221158 issued by the Registry of Deeds for Quezon City under Tax Declaration No. D-110-05193 and containing an area of 760.10 square meters; that Bright Properties, Inc. entered into a Joint Venture Agreement (JVA) with New San Jose Builders, Inc. for the erection of a condominium building (Project); that the Project is established in accordance with R.A. No. 4726; that on the other hand, Bright Centro Plaza Condominium Corporation is a corporation duly organized and existing under the laws of the Philippine that it is established to own the Property and the common areas and to manage the Project; that the Project consists of condominiums, each of which has two components, namely, an exclusive and divided interest in a physically defined constructed and improved air space as evidenced by a Condominium Certificate of Title and an undivided interest, in common, directly attributable to the land on which the Building is located and to other common areas of the building as evidenced by a membership share in the condominium corporation; and that in compliance with RA 4726 Bright Properties, Inc. hereby transfer, convey and assign unto Bright Centro Plaza Condominium Corporation all the rights, title and interests of Bright Properties, Inc., in and to the property above-described. Based on the foregoing representations, you now request exemption from the payment of creditable withholding tax prescribed under Revenue Regulations No. 2-98, as amended, and documentary stamp tax imposed under Section 196 of the Tax Code of 1997. In reply, please be informed that since the transfer of the land and the common area is without consideration and is not in connection with a sale made to the Bright Centro Plaza Condominium Corporation no income was generated and a fortiori , no creditable withholding tax is payable and collectible. In fact, the transfer by Bright Properties, Inc. of the property and the common area were made in favor of the individual unit owners of the project, and the purpose of the assignment to the Bright Centro Plaza Condominium Corporation of its common areas and facilities is for its management, and for the common benefit and enjoyment of the members-unit owners. ( Section 10, R.A. No. 4726 ) Moreover, Section 196 of the Tax Code of 1997 provides that on all conveyance, deeds, instruments, or writings, other than grants, patents or original certificates of adjudication issued by the Government, whereby any land, tenement or other realty sold shall be granted; assigned, transferred or otherwise conveyed to the purchaser, or purchasers, or to any other person or persons designated by such purchaser or purchasers, there shall be collected a documentary stamp tax, at the rates . . . prescribed, based on the consideration contracted to be paid for such realty or on its fair market value determined in accordance with Section 6(E) of the said Code, whichever is higher: . . . Inasmuch as the transfer of the property and the common area and facilities to Bright Centro Plaza Condominium Corporation is not in connection with a sale, the same is not subject to documentary stamp tax prescribed in Section 196 of the said Code, supra . In view thereof, this Office is of the opinion as it hereby holds that the aforesaid transfer of the property and the common area is not subject to the creditable withholding tax prescribed by Revenue Regulations No. 2-98, as amended, implementing 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 Tax Code of 1997. However, the notarial acknowledgment to said deed of conveyance is subject to the documentary stamp tax of P15.00 only pursuant to Section 188 of the said Code. ( BIR Ruling No. 550-93 dated December 29, 1993; DA419-96 dated November 12, 1996 ) 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. DCASIT Very truly yours, (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service