BIR Ruling [DA-178-02]

October 4, 2002 BIR RULING [DA-178-02] 27, 57 (B), 188 DA-437-98 Dynamic Realty and Resources Corporation Suite 2203B, 22/F PSE Center, East Tower Exchange Road, Ortigas Center Pasig City Attention: Ms. Emily E. Riego Chief Accountant Gentlemen : This refers to your letter dated March 20, 2002 requesting for a ruling that the conveyance of the land, together with the common areas of a condominium building project by Dynamic Realty & Resources Corporation in favor of Hampton Gardens Phase II-C Condominium Project is exempt from the creditable withholding tax and documentary stamp tax. It is represented that Dynamic Realty & Resources Corporation, a domestic corporation, is the registered owner of a parcel of land situated at 100 C Raymundo Avenue, Maybunga, Pasig City covered by Transfer Certificate of Title No. PT-99569 of the Registry of Deeds for the City of Pasig, where a 4-storey building known as Hampton Gardens Phase II-C Condominium Project was constructed; that the subject property has an area of One Thousand Two Hundred Fourteen (1,214) square meters, more or less; that on the other hand, Hampton Gardens Phase II-C Condominium Corporation is a corporation composed of all unit owners in the said project, created among others, for the purpose of managing and holding title to all the common areas in the condominium project including, the land on which the condominium is located; that on March 25, 1999, a Deed of Transfer of Common Areas was executed by and between Dynamic Realty & Resources Corporation and Hampton Gardens Phase II-C Condominium Corporation whereby the former conveyed title to the said land and the common areas of the building, in favor of the latter, free from all liens and encumbrances; that the said Deed of Transfer of Common Areas was executed without any monetary consideration, in pursuance of the requirements of R.A. No. 4726, otherwise known as the Condominium Act, as amended; and that the said conveyance is therefore sought to be exempted from the creditable withholding tax and documentary stamp tax inasmuch as said conveyance is being done simply to comply with the requirements of the Condominium Act, and for the protection of the unit-owners. In reply, please be informed that since the Deed of Transfer of Common Areas above-mentioned is without consideration and is not in connection with a sale made to the condominium corporation, no income was generated and a fortiori , no creditable withholding tax is payable and collectible. The purpose of the assignment to the condominium corporation is for the management of the project for the common benefit of the unit-owners. ( Section 10, R.A. No. 4726 ). In view thereof, this Office is of the opinion as it hereby holds that the aforesaid Deed of Transfer of Common Areas is not subject to the creditable withholding tax prescribed by Revenue Regulations No. 2-98, 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 since there is no monetary consideration in the subject assignment. However, the notarial acknowledgment to said deed of assignment is subject to the documentary stamp tax of P15.00 only pursuant to Section 188 of the said Code. 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