BIR Ruling [DA-260-01]

December 14, 2001 BIR RULING [DA-260-01] 27; 57 (B); 188 DA-587-98 Y . F. Busmente & Associates Law Offices Suite 723 BPI Office Condominium Plaza Cervantes, Binondo Manila Attention: Atty . Yolando F . Busmente Gentlemen : This refers to your letter dated November 7, 2001 requesting for a ruling that the transfer by Sorealty Development, Inc. of the common areas of the condominium built on its lot in favor of the Grand Century Mansion Association, Inc. is exempt from the payment of income tax, creditable withholding tax, capital gains tax and documentary stamp tax. It is represented that Sorealty Development Corporation is a domestic corporation organized and existing under and by virtue of the laws of the Philippines; that it is the owner-developer of a parcel of land situated in Zacateros St., Sta Cruz, Manila covered by Transfer Certificate of Title No. 200932 of the Register of Deeds for the City of Manila; that it developed and established the Grand Century Mansion Condominium in accordance with the provisions of Republic Act No. 4726, otherwise known as the Condominium Act and in accordance with the terms, conditions, and restrictions provided for in the Master Deed with Declaration of Restriction of the Grand Century Mansion dated February 24, 1999; that the Grand Century Mansion Association, Inc. was formed and organized pursuant to Condominium Act and the Corporation Code of the Philippines for the purpose of holding title or owning the common areas as defined in the Master Deed including the land upon which the condominium project has been developed or established; that a Deed of Conveyance was executed by Sorealty Development, Inc. for the purpose of assigning to the Grand Century Mansion Association, Inc. the ownership and management of the common areas which will promote the common benefit and enjoyment of the member/unit owners of said condominium project; and that said transaction is without any monetary consideration. In reply, please be informed that since the Deed of Conveyance above-mentioned was made without any monetary consideration and is not in connection with a sale made to the Association, no income was generated and a fortiori , no creditable withholding tax is payable and collectible. The purpose of the conveyance to the Association of its common areas is for the management, common benefit and enjoyment of the homeowners. ETIHCa In view thereof, this Office is of the opinion as it hereby holds that the aforesaid Deed of Conveyance transferring the common areas in favor of the Grand Century Mansion Association, Inc. 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 same Code. However, the notarial acknowledgment to the 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 587-98 citing DA-164-98 dated April 22, 1998) 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