BIR Ruling [DA-176-06]

March 27, 2006 BIR RULING [DA-176-06] Sections 27, 57 (B) & 188; BIR Ruling No. DA-235-03 Greenhills Wilson Circle Village Association, Inc . Wilson Circle Village, Wilson St. Greenhills, San Juan Metro Manila Attention: Mr. Jaime Koa President Gentlemen : This refers to your letter dated February 7, 2006 requesting for confirmation of your opinion that the conveyance of the titles to the road lots, park, easements and open space by Augvill Realty and Development Corporation (ARDC) to Greenhills Wilson Circle Village Association, Inc. (GWCVAI) is not subject to income, capital and documentary stamp taxes. As represented, ARDC is a domestic corporation duly registered under the laws of the Philippines with business address at 2/F, FUBC Building, Escolta, Manila. It is engaged in the business of real estate development and is the developer of the Greenhills Wilson Circle Village located at Greenhills, San Juan, Metro Manila. As such, it is the registered owner of certain road lots, park, easements and open space situated in said subdivision, particularly those covered by Tax Certificates of Title (TCT) No. 11542, 11543 and 11544, all of the Register of Deeds of San Juan, Metro Manila. On the other hand, GWCVAI is a community association formed by the buyers homeowners of Greenhills Wilson Circle Village, duly registered with the Securities and Exchange Commission (SEC) on December 23, 2000 under SEC Registration No. A2000019199, for the purpose of holding ownership of the aforesaid road lots, park, easements and open space situated in said subdivision. AEIcTD For the common enjoyment and safety of the subdivision homeowners, ARDC executed a Deed of Conveyance ceding, assigning and transferring the aforesaid road lots, park, easements and open space in favor of GWCVAI, free from all liens and encumbrances and without monetary consideration. In reply, please be informed that since the above-mentioned transfer and conveyance of the subject real properties was made without any monetary consideration and is not in connection with a sale made to the GWCVAI, no income was generated and a fortiori , no creditable withholding tax is payable and collectible. In view of the foregoing, this Office confirms your opinion that the aforesaid Deed of Conveyance transferring the subject properties in favor of the GWCVAI is not subject to income tax and consequently to the creditable withholding tax prescribed by Revenue Regulations (Rev. Regs.) No. 2-98, as amended by Rev. Regs. No. 6-2001, implementing Section 57(B) in relation to Section 27(A) and (D)(5), all of the Tax Code of 1997. However, if GWCVAI will sell the subject properties, the said sale shall be subject to the 6% final tax imposed under Section 27(D)(5) of the Tax Code of 1997. Finally, pursuant to Section 185 of the Revised Documentary Stamp Regulations (Regulations No. 26), conveyances of realty not in connection with a sale to trustees or other persons without consideration are not taxable. Accordingly, the transfer and conveyance of the aforesaid real properties is not subject to the documentary stamp tax (DST) imposed under Section 196 of the Tax Code of 1997. However, the notarial acknowledgement to the Deed of Conveyance is subject to the DST of PhP15.00 pursuant to Section 188 of the same Code (BIR Ruling No. DA-236-2003 dated July 23, 2003). IcSEAH 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 as null and void. AHCcET Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service