BIR Ruling [DA-411-05]

October 04, 2005 BIR RULING [DA-411-05] 57 (B), 196 Herrera Teehankee Faylona and Cabrera Law Offices 5/F SGV II Bldg., 6758 Ayala Avenue Makati City Attention: Attys. Arsenio C. Cabrera, Jr. and Marissa T. Academia Gentlemen : This refers to your letter dated September 9, 2005 requesting on behalf of your client, Advent Realty Management and Development Corporation (Advent for brevity), for confirmation of our opinion that the transfer by Advent to The Renaissance Condominium Corporation of the common areas and facilities, including the land on which the "The Renaissance" condominium building stands is not subject to withholding tax, value added tax, donor's tax, and documentary stamp tax. The facts as you represented are as follows: Advent is the owner of a parcel of land with an area of eight hundred fifty nine (859) square meters located at 215 Salcedo St., Legaspi Village, Makati City and covered by TCT No. 155414 (the "land"). On December 6, 1988, Advent executed a "Master Deed and Declaration of Restrictions" which embodies the terms and conditions that it will comply as developer of "The Renaissance", a condominium project which was developed and constructed on the aforesaid land. Pursuant to Part I, Section 8 of the Master Deed and Declaration of Restrictions of The Renaissance, Advent formed and organized a condominium corporation which was later registered as "The Renaissance Condominium Corporation" (the "Condominium Corporation"), a non-stock, non-profit corporation. The Condominium Corporation was formed for the purpose of holding title to all the common and limited areas of The Renaissance, including the land on which The Renaissance was constructed, in accordance with the provisions of the Condominium Corporation Act and the Corporation Code of the Philippines. The Condominium Corporation was likewise created to manage The Renaissance for the common benefit of its members. On September 8, 2005, the Corporation executed a "Deed of Transfer" conveying, without consideration, all the common areas and facilities in The Renaissance, including the land on which it stands, in favor of the Condominium Corporation for the above-mentioned purpose. In reply, please be informed that 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 acknowledgement 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. 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. DEHaTC Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service