BIR Ruling [DA-178-03]

June 5, 2003 BIR RULING [DA-178-03] 57 (B), 196 DA-019-2000 Cayaga, Zuiga and Angel 2nd Floor, One Corporate Plaza 845 Pasay Road, Legaspi Village Makati City Attention: Atty. Ann Claire P. Mercader Gentlemen : This refers to your letter dated September 23, 2002 requesting for a ruling that the conveyance of the common areas, including the land, by the developer. Inchport Realty Corporation to the condominium corporation, One Corporate Plaza Condominium Corporation is exempt from the payment of the creditable withholding tax and documentary stamp tax. The facts as represented are as follows: Inchport Realty Corporation, a domestic corporation organized and existing under and by virtue of the laws of the Republic of the Philippines, with principal office and place of business at the 21st Floor, Pacific Star Building, Gil Puyat cor. Makati Avenues, Makati City is the owner-developer of two (2) parcels of land covered by Transfer Certificates of Title (TCT) Nos. 169851 and 169852 of the Registry of Deeds of Makati City, with a combined area of Two Thousand Eighteen (2,018) square meters, more or less, upon which the One Corporate Plaza Condominium project, with address at No. 845 A. Arnaiz Avenue, Legaspi Village, Makati City, was constructed. One Corporate Plaza Condominium Corporation is a corporation that was organized for the purpose of holding title to, managing and maintaining the common areas of the project as defined in the Condominium Master Deed with Declaration of Restrictions, including the parcels of land above-mentioned. That a "Deed of Conveyance of Land and Common Areas in Condominium Project" was executed between the owner-developer and the condominium corporation whereby the former has conveyed title to the land, the common areas of the building and the facilities of the project such as machineries and equipment forming part of the common areas, in favor of the latter, free from all liens and encumbrances. The Deed of Conveyance was executed without monetary consideration, only in pursuance of the requirement of R.A. 4726 ("The Condominium Act"), Section 2, which mandates that the Condominium Corporation shall hold title to the "common areas, including the land or the appurtenant interests in such areas," of the condominium project. All the units of the project have already been sold by the developer and transferred in the name of the buyers, with the unit buyers/owners, also members of the Condominium Corporation, holding a percentage share of the common land on which the building stands and the common areas and appurtenances of the condominium building. When the developer sold the units, the selling price of each condominium unit already included a proportionate share of the cost of the common land on which the building stands and the common areas and appurtenances. The units were individually titled and the capital gains tax and documentary stamp tax, and transfer and registration fees were paid on the respective sales thereof. Each title to a unit sold is annotated in the Certificate of Title to the land. cTIESa In reply, please be informed that since the Deed of Conveyance above-mentioned was made without consideration and is not in connection with a sale made to One Corporate Plaza Condominium Corporation, no taxable income will be generated and a fortiori , no creditable withholding tax is payable and collectible. The purpose of the conveyance to One Corporate Plaza Condominium Corporation is for the management of the project for the common benefit of the unit-owners. ( Section 10, R.A. 4726 ) Moreover, Section 185 of the Revised Documentary Stamp Tax Regulations (Regulations No. 26)provides that "conveyances of realty not in connection with a sale, to trustees or other persons without consideration are not taxable." In view thereof, this Office is of the opinion as it hereby holds that the aforesaid transaction is not subject to the creditable withholding tax prescribed by Section 2.57(B) of 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 same Code. However, the notarial acknowledgment to said deed of conveyance is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the Tax Code of 1997. ( BIR Ruling No. DA-019-2000 dated January 11, 2000 ) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained 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