BIR Ruling [DA-284-03]

August 27, 2003 BIR RULING [DA-284-03] S. 27; 57 (B); 188 DA-305-2000/2-24-00 Dulay Pagunsan & Ty Law Offices 4/F Bee Lu Building, 103-113 Sen. Gil Puyat Avenue 1306 Pasay City, Metro Manila Attention: Atty. Herbert Paul J. Francisco Gentlemen : This refers to your letter dated August 18, 2003 requesting for a ruling that the assignment, transfer or conveyance of the common areas of the condominium project known as BROADVIEW TOWERS CONDOMINIUM (Condominium Project for brevity) by NKC PROPERTY AND DEVELOPMENT CORPORATION (NKC for brevity) in favor of BROADVIEW TOWERS CONDOMINIUM CORPORATION (Condominium Corporation for brevity) is exempt from the payment of income tax, creditable withholding tax, capital gains tax and documentary stamp tax, and value-added tax. NKC, a domestic corporation, is the owner-developer of two (2) parcels of land located at Mayhaligue corner Masangkay St., Sta. Ana, Manila and covered by Transfer Certificate of Title Nos. 232115 and 232117 of the Register of Deeds of Manila, upon which the Condominium Project was constructed. On the other hand, the Condominium Corporation, a non-stock, non-profit domestic corporation, is the condominium corporation that was formed and organized for the purpose of holding title to, managing and maintaining the common areas of the project, pursuant to the Master Deed with Declaration of Restrictions of the Condominium Project dated March 18, 1997. On August 12, 2003, a Deed of Assignment was executed between the Owner-Developer and the Condominium Corporation whereby the former conveyed its rights, interests and participation in and to the common areas of the building and facilities of the Condominium Project, in favor of the latter, free from all liens and encumbrances and without any monetary consideration, pursuant to the provisions of the Condominium Act, which mandates that the Condominium Corporation shall hold title to the common areas as well as the Master Deed and Declaration of Restrictions of the Condominium Project. Furthermore, majority of the units of the projects have already been sold and titled in the name of the individual unit-owners, after having paid the documentary stamp tax, transfer and registration fees, and capital gains tax and that each title to a unit sold is annotated in the Certificate of Title to the land. Therefore, inasmuch as the Deed Of Assignment above-mentioned is being executed simply to comply with the requirements of the Condominium Act and the Master Deed and Declaration of Restrictions of the Condominium Project, and is without consideration, no income was generated from the assignment, transfer and conveyance of the said common areas of the Condominium Project and a fortiori, no income tax, creditable withholding tax, capital gains tax, documentary stamp tax and value-added tax is payable or collectible. In connection with the foregoing transaction, you submitted the following documents: (1) Deed of Assignment between NKC Property and Development Corporation and Broadview Towers Condominium Corporation; (2) Articles of Incorporation NKC Property and Development Corporation; (3) Articles of Incorporation of Broadview Towers Condominium Corporation; (4) Master Deed with Declaration of Restriction of Broadview Towers Condominium; and (5) Transfer Certificate of Title Nos. 232115 and 232117. In reply, please be informed that since the assignment, transfer or conveyance of the common areas of the condominium project, through the Deed of Assignment above-mentioned, is without consideration and is not in connection with a sale made to the Condominium Corporation, no income was generated, and a fortiori, no income tax, capital gains tax, or creditable withholding tax, and value-added tax is payable and collectible. The purpose of the conveyance to the Condominium Corporation is for the management of the Condominium Project for the common benefit of the unit-owners pursuant to Section 10 of R.A. 4726, otherwise known as the Condominium Act. In view thereof, this Office is of the opinion as it hereby holds that the assignment, transfer or conveyance of the common areas of the condominium project, through the aforesaid Deed of Assignment, is not subject to income tax, capital gains tax, creditable withholding tax, or value-added 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 Transfer 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 ascertained 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