BIR Ruling [DA-424-04]

August 5, 2004 BIR RULING [DA-424-04] 27; 57 (B); 188 DA-371-2004 MBA Condominium Owners Association 5022 P. Burgos St., Makati City Attention: Ms . Ma . Cristinal G . Feibel President Gentlemen : This refers to your letter dated June 15, 2004 requesting for a confirmation of your opinion that the transfer by Makati Bel-Air Condominium Development, Inc. ("MBCDI") of the common areas and facilities of MBA Apartments ("Condominium Project") to the MBA Condominium Owners Association ("MBACOA"), including the land on which the Condominium Project stands, is not subject to the expanded withholding tax and documentary stamp tax. Based on your representations, as well as from the documents submitted, the facts are as follows: 1. MBCDI is engaged in the real estate development. Among its projects is the MBA Apartments. Said Condominium Project is located at 5022, P. Burgos St., Makati City, covered by Transfer Certificate of Title No. 275850. 2. During the process of developing said Condominium Project, MBCDI caused the registration and annotation at the back of TCT No. 275850 of a "Master Deed with Declarations of Restrictions" for the Condominium Project, thereby placing the Makati Bel-Air Apartments under the operation of the Condominium Act of the Philippines. 3. MBCDI likewise caused the organization and incorporation on April 7, 1975 of the MBACOA, a SEC-registered non-stock non-profit corporation, for the purpose of holding title to the common areas of the Condominium Project. 4. Pursuant to the Condominium Law and the Master Deed with Declaration of Restrictions, the parcel of land covered by TCT No. 275850 has became a common area and should be under the ownership and in the name of MBACOA. SADECI 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 MBACOA, 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 transfer of the subject property in favor of MBACOA is not subject to the creditable withholding tax prescribed by Revenue Regulations No. 2-98, as amended, 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. 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 the instrument transferring the subject property is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the Tax Code of 1997. ( BIR Ruling No. DA-375-2003 dated October 15, 2003 ) aIcDCT 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.) MILAGROS V. REGALADO Assistant Commissioner Legal Service