BIR Ruling [DA-453-06]

July 25, 2006 BIR RULING [DA-453-06] 57 (B), 196; DA-178-2003 Martinez Martinez Alcudia Law Offices Suites 1405 and 1406 Richville Corporate Tower 1107 Alabang-Zapote Road, Madrigal Business Park Ayala Alabang, Muntinlupa City Attention: Attys. Edward P. Martinez and Ronnette O. Franco Gentlemen : This refers to your letter dated September 26, 2005 requesting for a confirmation of your opinion relative to the conveyance of land and common areas in a condominium project by Southwest Tower, Inc. in favor of Richville Corporate Tower Condominium Corporation. The facts as you represented are as follows: Southwest Tower, Inc. is a corporation duly organized and registered under Philippine laws to engage in real estate development. One of its projects was the construction and development of a condominium building identified as the Richville Corporate Tower (Project). Said Project was brought under the provisions of Republic Act (RA) No. 4726, as amended, otherwise known as the Condominium Act. The Project is located on the parcel of land owned and registered in the name of Southwest, and is covered by Transfer Certificate of Title No. 184573. Pursuant to the Project's Master Deed with Declaration of Restrictions a condominium corporation shall be established to hold title to the parcel of land and the common areas of the Project. Thus, Richville Corporate Tower Condominium Corporation, a non-stock and non-profit corporation was organized and registered with the Securities and Exchange Commission (SEC). Pursuant to the provisions of the Master Deed with Declaration of Restrictions of the Project and also in harmony with the provisions of the Condominium Act, Southwest Tower, Inc. will execute a Deed of Conveyance, where it will transfer title over the land, without monetary consideration, in favor of Richville Corporate Tower Condominium Corporation so that the latter may hold title over the land and the respective common areas of the condominium. In reply, please be informed that the conveyance of the land and common areas in the condominium project was made without consideration and is not in connection with a sale made to Richville Corporate Tower Condominium Corporation. Inasmuch as the purpose of the conveyance to Richville Corporate Tower Condominium Corporation is for the management of the project for the common benefit of the unit-owners and no taxable income has been generated, therefore, no creditable withholding tax prescribed under 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 is payable and collectible. Neither is such conveyance subject to the documentary stamp tax imposed under Section 196 of the same Tax Code. 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." However, the notarial acknowledgment to said Joint 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-178-2003 dated June 5, 2003) 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 as null and void. HCITDc Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service