BIR Ruling [DA-268-03]

August 15, 2003 BIR RULING [DA-268-03] Common Areas DA-587-98 PX2 Enterprises Co., Inc. Penthouse, MGF-Champaca Building 156 Amorsolo Street, Legaspi Village Makati City Attention: Mrs. Socorro P. Lim Gentlemen : This refers to your letter dated May 27, 2003 requesting in effect for a ruling that the transfer by PX2 Enterprises Co., Inc. (PX2) of its parcel of land and the common areas of the condominium built therein in favor of SPL Condominium Corporation (SPL) is exempt from the payment of creditable withholding tax and documentary stamp tax. It is represented that PX2 is a domestic corporation duly registered with the Securities and Exchange Commission; that it is the owner-developer of a residential condominium project known as SPL Condominium located at 100 E Abada Street, Loyola Heights, Quezon City, with a land area of 949 square meters and covered by TCT No. RT-1803 (381589) issued by the Registry of Deeds of Quezon City; that said project which consists of a 4-storey building is made up of 16 residential units; that a Deed of Conveyance was executed by PX2 for the purpose of assigning to SPL the ownership and management of the land and 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 as follows: Since the above-mentioned transfer of the condominium project from PX2 to SPL is without consideration and is not in connection with a sale made to SPL, no income was generated by PX2, 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. (Section 10 of R.A. 4726, otherwise known as the "Condominium Act of the Philippines"). Thus, the aforesaid Deed of Conveyance is not subject to any creditable withholding tax under Sec. 57(B), in relation to Sec. 27(A) of the Tax Code of 1997. Moreover, the subject conveyance of the land and common areas of the Condominium building from PX2 to SPL is not subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. However, the acknowledgment to the said deed of conveyance is subject to the documentary stamp tax of P15.00 on certification pursuant to Sec. 188 of the Tax Code of 1997. ( BIR Ruling No. DA 587-98 ) 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. CHDAEc Very truly yours, Commissioner of Internal Revenue By: (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service