BIR Ruling [DA-421-00]

December 12, 2000 BIR RULING [DA-421-00] Common Areas DA-587-98 Cathy Metal Corporation 23/F Galleria Corporate Center EDSA corner Ortigas Avenue Quezon City Attention: Mr . Noel A . Calibo Gentlemen : This refers to your letter dated November 23, 1999 requesting for a ruling that the transfer by Cathay Metal Corporation (Cathay) of its parcel of land and the common areas of the condominium built therein in favor of Dynasty Towers Condominium Corporation (Dynasty) is exempt from the payment of the creditable withholding tax and documentary stamp tax. It is represented that Cathay is a domestic corporation primarily engaged in steel manufacturing; that among its secondary business is to develop and hold for investment or otherwise, real estate of all kinds; that it is the owner-developer of a residential/commercial condominium project known as Dynasty Towers Condominium located along Jose Abad Santos Avenue corner Bambang Street, Tondo, Manila, with a land area of 1,529 square meters and covered by TCT No. 225818 issued by the Registry of Deeds of Manila; that said project which consists of a 26-storey building is made up of 156 residential units and 11 commercial units; that a Deed of Conveyance was executed by Cathay for the purpose of assigning to Dynasty the ownership and management of the land and the common areas which will promote the common benefit and enjoyment of the member/unit owners of said condominium project; and that said transaction is without any monetary consideration. In reply, please be informed as follows: Since the above-mentioned transfer of the condominium project from Cathay to Dynasty is without consideration and is not in connection with a sale made to Dynasty, no income was generated by Cathay, 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 of R.A. 4726, otherwise known as the "Condominium Act of the Philippines"). Thus, the aforesaid Deed of Conveyance is not subject to any creditable withholding tax under Sec. 57(B), in relation to Sec. 27(A) of the Tax Code of 1997. cIaHDA Moreover, the subject conveyance of the land and common areas of the Condominium building from Cathay to Dynasty is not subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. However, the acknowledgment to the said deed of conveyance is subject to the documentary stamp tax of P15.00 on certification pursuant to Sec. 188 of the Tax Code of 1997. (BIR Ruling No. DA 587-98 citing DA-164-98 dated April 22, 1998) and BIR Ruling No. 75-97 dated July 10, 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, Commissioner of Internal Revenue By: (SGD.) LILIAN B. HEFTI Deputy Commissioner Legal and Inspection Group