Ong Mijares Valenciano Law Office

May 30, 2008 BIR RULING [DA-325-08] BIR Ruling No. DA-411-05 Ong Mijares Valenciano Law Office Unit A 302 V. Cruz St. cor. P. G Attention: Atty. Leovicildo H. Mijares III Gentlemen : This refers to your letters dated July 2, 2007 indorsed to this Office by Assistant Regional Director Dr. Marina C. De Guzman of Revenue Region No. 7, Quezon City requesting on behalf of your client, Cypress Village Condominium Apartment, Inc. ("Cypress" for brevity) for a ruling that the transfer by Realty Baron Corporation ("Baron" for brevity) to Cypress of a parcel of land together with the common areas of the building and facilities of the condominium project constructed thereon pursuant to the provisions of Republic Act (R.A.) No. 4726, otherwise known as the Condominium Act is exempt from creditable withholding tax and documentary stamp tax (DST). As represented, Cypress is a non-stock, nonprofit corporation registered with the Securities and Exchange Commission (SEC) under SEC Registration No. A200109200 dated July 26, 2001. It is a condominium corporation formed and organized pursuant to R.A. No. 4726. Its primary purpose is "to own hold title to the common areas in the condominium project known and identified as 'Cypress Village Condominium Apartments' . . ." and "to manage the said condominium project pursuant to and in accordance with the provisions of R.A. No. 4726 and the said Master Deed with Declaration of Restrictions . . ." On the other hand, Baron is a realty estate corporation engaged in the business of developing and constructing housing projects. It is the owner and developer of a parcel of land located at Kaingin Road, Brgy. Apolonio Samson, Balintawak, Quezon City with an area of 29,369 square meters and covered by Transfer Certificate of Title No. 143048 of the Registry of Deeds of Quezon City. It is registered with the SEC under SEC Registration No. 35666 dated January 11, 1983. Its primary purpose is "to buy, sell, deal in, lease, mortgage, hold, improve, sub-divide, and otherwise dispose of lands, houses, and buildings, or any interest therein, and to construct on lands owned by the corporation, as well as on lands owned by others, for purposes of starting on the general business of contractors, houses, buildings, roads, bridges, alleys, artesian walls, sewers, and all kinds of improvements." For failure of Baron to register and transfer to Cypress the title of the land upon which the condominium project is situated pursuant to R.A. No. 7426 and the Master Deed and Declaration of Restrictions, Cypress sought the intervention of the HLURB for which a final decision dated December 19, 2003 was rendered after due process ordering Baron to transfer the above title to Cypress. In reply, please be informed that in BIR Ruling No. DA-411-2005 dated October 4, 2005, this Office had occasion to rule as follows: ". . . since the Deed of Transfer 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 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 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." In view of the foregoing, this Office hereby holds that the transfer by Baron to Cypress of the above-described parcel of land together with the common areas and facilities of Cypress Village Condominium Apartments pursuant to the provisions of R.A. No. 4726 is exempt from creditable withholding tax and DST. However, the notarial acknowledgment to said deed of transfer is subject to the DST of P15.00 pursuant to Section 188 of the Tax Code of 1997. 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, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service