BIR Ruling [DA-218-01]

October 24, 2001 BIR RULING [DA-218-01] Atty. Elaine G. Miranda-Araneta & Associates 4th Floor Galleria Corporate Center EDSA Corner Ortigas Avenue Quezon City Attention: Attys. Elaine G. Miranda-Araneta and Irma F. Valenzona Gentlemen : This refers to your letter dated February 14, 2001 requesting for a ruling that the conveyance by Robinsons Land Corporation (formerly Robinson's Commercial Complex, Inc.), developer/assignor, of the common areas, including the land of a condominium project known as Galleria Corporate Center Condominium Corporation, is exempt from the capital gains tax/creditable withholding tax and documentary stamp tax. It is represented that Robinsons Land Corporation, is the registered owner of a parcel of land located at Edsa corner Ortigas Avenue, Quezon City covered by TCT No. 38664 of the Registry of Deeds for Quezon City containing an area of 1,034.70 square meters; that it built a condominium building known as the Galleria Corporate Center on the aforesaid parcel of land and thereafter sold the condominium units to various purchasers; that on the other hand, Galleria Corporate Center Condominium Corporation, is a corporation duly organized and existing under the laws of the Philippines; that it was created as a management body to own and manage the land and other common areas of the Galleria Corporate Center Condominium building; and that a Deed of Conveyance will be executed by and between Robinsons Land Corporation and Galleria Corporate Center Condominium Corporation whereby the former will convey the title to the said land, the common areas of the building in favor of the latter, free from all liens and encumbrances, in pursuance to the requirements of RA 4726, otherwise known as the Condominium Act. In reply, please be informed that since the Deed of Conveyance is without consideration and is not in connection with a sale made to the Galleria Corporate Center Condominium Corporation, no income was generated and a fortiori , no creditable withholding tax is payable and collectible. In fact, the sales by Robinsons Land Corporation of the condominium units were made in favor of the individual unit owners of the Galleria Corporate Center, and the purpose of the conveyance to the Galleria Corporate Center Condominium Corporation of its common areas and facilities is for its management, and for the common benefit and enjoyment of the members-unit owners. ( Section 10, R.A. No. 4726 ) Moreover, Section 196 of the Tax Code of 1997 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 common areas and facilities to the Galleria Corporate Center 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, supra . In view thereof, this Office is of the opinion as it hereby holds that the aforesaid conveyance is not subject to the creditable withholding tax prescribed by Revenue Regulations No. 2-98, as amended by Revenue Regulations No. 6-2001, 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. However, the notarial acknowledgment to said deed of conveyance is subject to the documentary stamp tax of P15.00 only pursuant to Section 188 of the said Code. ( BIR Ruling No. 550-93 dated December 29, 1993; DA419-96 dated November 12, 1996 ) 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 Acting Assistant Commissioner Legal Service