Jose C. Leynes

March 27, 2007 BIR RULING [DA-184-07] DA 610-04 Jose C. Leynes Ma. Lourdes L. Guillergan 703-A Vicente Madrigal Building 6793 Ayala Avenue Makati City Attention: Atty. Ma. Lourdes L. Guillergan Gentlemen : This refers to your letter dated March 9, 2007 stating that your client, LEXMEDIA REALTY, INC. (LEXMEDIA), with principal office address at the 2nd Floor, Sunvar Plaza Building, Pasay Road, Makati City, is the registered owner of a parcel of land situated in Makati City containing an area of 355 square meters and covered by TCT No. 220934 issued by the Registry of Deeds for Makati City; that the said property is developed into a residential condominium project known as CASA BOUGAINVILLA by virtue of a Master Deed with Declaration of Restrictions executed on June 22, 2005; that the said project constructed on the property was divided into condominium units; that pursuant to the provisions of Section IV of the said Master Deed and Section 10 of the Condominium Act, CASA BOUGAINVILLA CONDOMINIUM CORPORATION (Condominium Corporation) was organized and its Certificate of Registration No. CN200519772 was issued by the Securities and Exchange Commission (SEC) on November 30, 2005; that the Corporation was established primarily to manage the condominium project and to hold title to the common areas; that in compliance with the aforesaid provisions of the Master Deed and the Condominium Act, LEXMEDIA proposes to transfer to the Corporation the parcel of land above-mentioned by way of a Deed of Assignment; and that LEXMEDIA will not receive any consideration from the condominium corporation on the proposed transfer but merely to comply with the provisions of the Condominium Act. EASCDH In consideration therewith, you now request confirmation of your opinion that the proposed transfer by LEXMEDIA of its property to the Condominium Corporation is not subject to capital gains tax/withholding tax, VAT and the corresponding documentary stamp tax. In reply thereto, please be informed that since the Deed of Assignment is without consideration and is not in connection with a sale made to the Condominium Corporation, no income was generated and a fortiori , no capital gains tax or creditable withholding tax is payable and collectible. In fact, the sales by LEXMEDIA of the condominium units were made in favor of the individual unit owners of the Condominium Corporation, and the purpose of the assignment to the Condominium Corporation is for its management and for the common benefit and enjoyment of the members-unit owners. (Section 10, R.A. No. 4726) HIACac Moreover, Section 196 of the Tax Code of 1997, as amended, 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 assignment of the property to the 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, as amended. Furthermore, the assignment of the property to the Condominium Corporation is not subject to VAT prescribed in Section 4.106-2 of Revenue Regulations No. 16-2005 since the assignment thereof is not made in connection with a sale or in the ordinary course of trade or business but merely in compliance with R.A. No. 4726. (BIR Ruling No. DA610-04 dated December 1, 2004) IN VIEW OF THE FOREGOING, this Office holds that the assignment of property is not subject to capital gains tax/creditable withholding tax prescribed in Revenue Regulations No. 2-98, as amended. Neither, is it subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997 and to the VAT prescribed in Section 4.106-2 of Revenue Regulations No. 16-2005. However, the notarial acknowledgment to said deed of assignment is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the Tax Code of 1997, as amended. HDAaIc 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, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service