The Salcedo Towers Condominium Corporation

May 18, 2007 BIR RULING [DA-309-07] R.A. 4726 DA-145-2003 The Salcedo Towers Condominium Corporation 10th Floor Salcedo Towers 169 H.V. dela Costa St. Salcedo Village, Makati City Attention: Ms. Margarita B. Flores Property Manager Gentlemen : This refers to your letter dated October 9, 2006 requesting for a confirmation that the conveyance of the common areas, facilities and equipment, including the land on which the condominium building stands known as the Salcedo Towers Condominium by Jemeli Realty Corporation (Jemeli for brevity) in favor of the Salcedo Towers Condominium Corporation (the "Condominium Corporation") is exempt from the payment of income, creditable withholding, capital gains, value-added and documentary stamp taxes. It appears that Jemeli, a domestic corporation is the registered owner of a parcel of land situated at Lot 3, Blk 1-New of (LRC) Pcs-7021 in between Sen. Gil Puyat Avenue and H.V. dela Costa St., Salcedo Village, Makati City under Transfer Certificate of Title (TCT) No. 165847, Book No. T-828, Page No. 47 of the Registry of Deeds of Makati City with an area of 1,436 sq.m. Jemeli, in accordance with the provisions of Republic Act No. 4726, otherwise known as the Condominium Act, constructed on the said parcel of land a condominium building consisting of three (3) basement levels, twelve (12) parking levels and two (2) identical towers with fifteen (15) floors and a cooling tower level each. On the other hand, the Condominium Corporation, is a nonstock, non-profit corporation formed and organized for the purpose of managing and holding title to all the common/limited common areas, facilities and equipment, including the land on which the condominium building is located. Jemeli executed a Deed of Conveyance transferring all its rights, interests and participation in and to the common areas of the building and facilities of the condominium project to the Condominium Corporation, free from any and all liens and encumbrances and without any monetary consideration, pursuant to the provisions of the Condominium Act and the Master Deed with Declaration of Restrictions of Jemeli, which mandates that the condominium corporation shall hold title to the common areas. In reply, please be informed that since the Deed of Conveyance was made without consideration and is not in connection with a sale made to the Condominium Corporation, no taxable income will be generated and a fortiori , no creditable withholding tax is payable and collectible. The purpose of the conveyance to The Salcedo Towers Condominium Corporation is for the management of the project for the common benefit of the unit-owners. (Section 10, R.A. 4726) 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." 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. 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. The transfer is also not subject to VAT since under Section 105 of the Tax Code of 1997, any person who, in the course of trade or business, sells, barters, exchanges, leases goods or properties, renders services and any person who imports goods shall be subject to VAT imposed in Sections 106 to 108 of the same Tax Code, as amended. Hence, by conveying the common areas, facilities and equipment, including the land on which the condominium building stands, Jemeli, neither sells, barters, exchanges goods, properties nor renders services to be subject to VAT. TAIESD 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 as null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service