BIR Ruling [DA-333-04]

June 21, 2004 BIR RULING [DA-333-04] 27; 57 (B); 188 DA-375-2003 Universal Rightfield Property Holdings, Inc. Unit 713, Pioneer Corporate Center, Pioneer Highlands Condominium Pioneer corner Madison Streets, Mandaluyong City Attention: Mr. John R. Sadullo Legal Officer Gentlemen : This refers to your letter dated July 22, 2003 requesting for a confirmation of your opinion that the transfer by Universal Rightfield Property Holdings, Inc. (the "Company") of the common areas and facilities of Pioneer Highlands Condominium Project (the "Project") to the Pioneer Highlands North Condominium Corporation and Pioneer Highlands South Condominium Corporation, including the land on which the two corporations stand, is not subject to the expanded withholding tax and documentary stamp tax. The facts, as represented, are as follows: 1. Universal Rightfield Property Holdings, Inc. is engaged in the real estate development. Among its projects is the Pioneer Highlands Condominium Project. Said Project is located on the parcels of land owned and registered in the name of the company at Pioneer corner Madison Streets, Mandaluyong City. It is a mixed-used development, which consists of five towers, as follows: a. Tower I (East Tower) and Globe Telecom Plaza I located at the south side of the Project, situated in the parcel of land covered by Transfer Certificate of Title (TCT) No. 10993; and b. Tower II (West Highlands), Tower III (Madison Suites) and Globe Telecom Plaza II located at the north side of the Project, situated in the parcel of land covered by TCT No. 10994; 2. Pursuant to Project's Master Deed with Declaration of Restrictions, two (2) condominium corporations were established to hold title to the respective parcels namely: Pioneer Highlands (South) Condominium Corporation and Pioneer Highlands (North) Condominium Corporation. Both Corporations have been registered with the Securities and Exchange Commission as non-stock non-profit corporations; and 3. Pursuant to the terms of the Master Deed with Declarations of Restrictions of the Project and the provisions of the Condominium Act, the Company will execute Deeds of Conveyance where the Company will transfer titles to land without monetary consideration to the condominium corporations concerned so the latter may hold title to the land and their respective common areas. In reply, please be informed as follows: 1. Since the above-mentioned transfer and conveyance of the subject real property was made without any monetary consideration and is not in connection with a sale made to Pioneer Highlands South Condominium Corporation and Pioneer Highlands North Condominium Corporation, no income was generated and a fortiori , no creditable withholding tax is payable and collectible. In view thereof, this Office is of the opinion as it hereby holds that the aforesaid Deed of conveyance transferring the subject property in favor of Pioneer Highlands South Condominium Corporation and Pioneer Highlands North Condominium Corporation is not subject to the creditable withholding tax prescribed by Revenue Regulations No. 2-98, implementing Section 57(B) in relation to Section 27(A) and (D)(5), all of the Tax Code of 1997. ( BIR Ruling No. DA-164-98 dated April 22, 1998 ) 2. If Pioneer Highlands South Condominium Corporation and Pioneer Highlands North Condominium Corporation will sell the aforesaid subject properties, the said sale shall be subject to the 6% final tax imposed under Section 27(D)(5) of the Tax Code of 1997. 3. 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." Thus, it is neither subject to the documentary stamp tax nor value-added tax imposed under Section 196 and 105, both of the Tax Code of 1997. 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. ( BIR Ruling No. DA-184-2001 dated October 10, 2001 ) 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. HSIDTE Very truly yours, Commissioner of Internal Revenue By: (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service