BIR Ruling [DA-269-03]

August 15, 2003 BIR RULING [DA-269-03] R.A. No. 4726 DA-305-2000 LPL Greenhills Condominium Corporation No. 17 Eisenhower St., Greenhills, San Juan Metro Manila Attention: Mr. Lauro S. Leviste II President Gentlemen : This refers to your letter dated May 22, 2003 requesting for a confirmation that you are exempted from the payment of capital gains tax and the documentary stamp tax on the transfer/conveyance of title to the land and common areas from the developer to the condominium corporation. It is represented that LPL GREENHILLS CONDOMINIUM CORPORATION, a domestic corporation, is the registered owner of a parcel of land situated at 17 Eisenhower Street, Greenhills, San Juan, Metro Manila covered by Transfer Certificate of Title No. 6389-R of the Registry of Deeds of San Juan where the condominium project known as the LPL Greenhills (Condominium Project) was constructed; that the subject property has a total area of One Thousand (1,000) square meters; that LPL Greenhills in accordance with the provisions of Republic Act No. 4726 otherwise known as the Condominium Act (R.A. 4726) constructed on the above-stated property, a commercial and residential condominium building consisting of a thirty five (35) storey building with four (4) basement parkings; the first basement has eight (8) parking slots and houses the electrical, storage, air chase, garbage collection, and sewage collection rooms; the second basement has twenty (20) parking slots; the third basement has twenty two (22) parking slots; the fourth basement has twenty four (24) parking slots; the second to sixth floors are also allotted mainly as parking areas; the third to fifth floors house twenty one (21) parking slots each, while the sixth floor has twenty (20) parking slots; the ground floor is composed of the main lobby and seven (7) commercial offices; the mezzanine level is composed of the deck, hallway, fire exit, stairs, and six (6) commercial offices. The upper floors from the 7th floor to the roof deck shall be divided into One Hundred Sixty Two (162) residential units. The 7th to the 16th floors shall house twelve (12) units each, all one bedroom units. The 17th to 34th floors shall have nine (9) units each (36-3 bedroom and 18-2 bedroom units). The 35th floor houses the elevator, lobby, stairs, electrical room, auxiliary room, hallway, male and female toilets, lockers, sauna, gym, aerobics, kitchen, pantry, coffee shop, swimming pool, sun deck and roof deck ledge; that on the other hand, LPL Greenhills Condominium Corporation is a non-stock, non-profit corporation formed and organized in accordance with R.A. No. 4726, for the purpose of managing and holding title to all the common areas in the condominium project including, the land on which the condominium is located; that a Deed of Conveyance was executed by and between Conrad and Sons Realty, Inc. and LPL Greenhills Condominium Corporation, whereby the former conveyed title to the said land, the common areas of the building, facilities and equipment of the project, in favor of the latter, free from all liens and encumbrances; that the said Deed of Conveyance was executed without any monetary consideration, in pursuance of the requirements of R.A. No. 4726, as amended; and that the said conveyance is therefore sought to be exempted from the creditable withholding tax and documentary stamp tax inasmuch as said conveyance is being done simply to comply with the requirements of the Condominium Act, and for the protection 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 was 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. DAHaTc In view thereof, this Office is of the opinion as it hereby holds that the aforesaid Deed of Conveyance 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 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-305-2000 dated February 24, 2000) 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 Assistant Commissioner Legal Service