Lagon Lagon & Tan Law Offices

April 25, 2007 BIR RULING [DA-256-07] R.A. No. 4726; DA-178-03; 236-03 Lagon Lagon & Tan Law Offices Suite 805 Annapolis Wilshire Plaza No. 11 Annapolis St., Greenhills San Juan, Metro Manila Attention: Leo A. T. Lagon For the Firm Gentlemen : This refers to your letter dated January 18, 2007 requesting on behalf of your client, FIRST TAIPAN GROUP DEVELOPMENT CORPORATION (FTGDC) for a confirmation that the transfer of its parcel of land and common areas of the condominium project built therein in favor of ROSEMONT TOWER CONDOMINIUM ASSOCIATION, INC. is exempt from the payment of income tax/creditable withholding tax and the documentary stamp tax. It is represented that FTGDC is a corporation duly organized and existing under and by virtue of the laws of the Philippines with principal office at No. 539 T. Pinpin Street, Binondo, Manila; that it was created with the primary purpose: " to engage in and deal with the realty business, that is to purchase, sell, lease, mortgage, administer, manage, develop, construct and or invest in lands, commercial, industrial and residential building, apartments, townhouses . . . "; that FTGDC is the owner of two (2) parcels of land situated at No. 75 Panay Avenue, Barangay Paligsahan, Quezon City with an area of 319.80 and 1,080.60 square meters respectively, and covered by Transfer Certificate of Title No. N-143937 issued by the Register of Deeds of Quezon City; that on the said parcels of lot, a condominium building known as ROSEMONT TOWER was erected and sold to its individual unit owners; that the Master Deed with Declaration of Restrictions provides that: " pursuant to the condominium act, a non-stock, non-profit condominium corporation shall be organized for the purpose of holding title to the land as well as the common areas of the project "; that in accordance with the above-cited provision of the Master Deed, ROSEMONT TOWER CONDOMINIUM ASSOCIATION, INC., a non-stock, non-profit association of unit owners was organized and registered with the Securities and Exchange Commission on July 2, 1999; that FTGDC is now going to turn over to the condominium corporation the land on which the condominium project is situated for the purpose of holding and managing the same; that the conveyance of property is without any consideration but rather its main and primary purpose is to transfer the property to the condominium corporation so that the latter may manage the project for the common benefit of the unit owners. In reply, please be informed that since the Deed of Conveyance abovementioned is without consideration and is not in connection with a sale made to the condominium corporation, no income is generated and a fortiori , no creditable withholding tax is payable and collectible. The purpose of the conveyance to the condominium corporation is for the management of the project for the common benefit of the unit-owners, pursuant to Section 10 of R.A. 4726, otherwise known as the Condominium Act. 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." Further, since the conveyance of common areas to ROSEMONT TOWER CONDOMINIUM ASSOCIATION, INC. is without monetary consideration and is not in connection with a sale, it is likewise not subject to VAT imposed under Section 106 of the Tax Code of 1997, as amended, nor to capital gains tax imposed under Section 27 (D) (5) of the Tax Code of 1997, as amended. 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, as amended. Neither is it subject to the documentary stamp tax imposed under Section 196 of the same Code. However, the notarial acknowledgement 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, as amended. cEDIAa 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