BIR Ruling [DA-151-03]

May 8, 2003 BIR RULING [DA-151-03] Common Areas DA-587-98 Oro Del Sur Industrial Corporation 10 Doa Natividad Building, Quezon Avenue Quezon City Attention: Mr. Antonio Quehan Lim Gentlemen : This refers to your letter dated March 18, 2003 requesting for a ruling that the transfer by ORO DEL SUR INDUSTRIAL CORPORATION ( Oro del Sur for brevity) of its parcel of land and the common areas of the condominium built therein in favor of SAN FERNANDO TOWER CONDOMINIUM ASSOCIATION, INC. (the Association for brevity) is exempt from the payment of the creditable withholding tax and documentary stamp tax. It is represented that Oro del Sur is a corporation duly organized and existing under and by virtue of the laws of the Philippines; that it is the owner-developer of a residential/commercial condominium project known as San Fernando Tower located along Muelle de Binondo, San Nicolas, Tondo, Manila, with a land area of 452.70 square meters and covered by TCT No. 217913 issued by the Registry of Deeds of Manila; that said project which consists of a 20-storey building, including the Penthouse, is made up of several residential and commercial units; that in compliance with the provisions of R.A. 4726, otherwise known as the Condominium Act of the Philippines, a Deed of Conveyance was executed by Oro del Sur for the purpose of assigning to the Association the ownership and management of the land and the common areas which will promote the common benefit and enjoyment of the member/unit owners of said condominium project; and that said transaction is without any monetary consideration. In reply, please be informed as follows: Since the above-mentioned transfer of the condominium project from Oro del Sur to the Association is without monetary consideration and is not in connection with a sale made to the Association and/or its members, no income was generated by Oro del Sur, 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. (Section 10 of R.A. 4726, otherwise known as the "Condominium Act of the Philippines"). Thus, the aforesaid Deed of Conveyance is not subject to any creditable withholding tax under Sec. 57(B), in relation to Sec. 27(A) of the Tax Code of 1997. Moreover, the subject conveyance of the land and common areas of the Condominium building from Oro del Sur to the Association is not subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. However, the acknowledgment to the said deed of conveyance is subject to the documentary stamp tax of P15.00 on certification pursuant to Sec. 188 of the Tax Code of 1997. (BIR Ruling No. DA 587-98 citing DA-164-98 dated April 22, 1998 and BIR Ruling No. 75-97 dated July 10, 1997) 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, Commissioner of Internal Revenue By: (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service