Castelo Law Office

September 14, 2007 BIR RULING [DA-484-07] R.R. 2-98, as amended. BIR Ruling No. 169-2003 Castelo Law Office 4/F Rgc Bldg., 219 Apo Street Mandaluyong City Attention: Atty. Eduardo G. Castelo Gentlemen : This refers to your letter dated July 27, 2007 requesting on behalf of your client, Wack Wack Condominium Unit Owners, Inc . for a ruling that the transfer by GFC Development Corporation ("GFC" for brevity) of its two (2) parcels of land and the common areas of Wack Wack Townhomes Condominium Project is exempt from the payment of creditable withholding tax or capital gains tax and documentary stamps tax. HEDCAS As represented, GFC is a corporation duly organized and existing under and by virtue of Philippine laws. It is the registered owner of two (2) adjoining parcels of land located along Lee St., Brgy. Addition Hills, Mandaluyong City, consisting of Four Hundred Ninety Four (494) square meters, more or less, covered by Transfer Certificate of Title (TCT) No. 39868, and Eight Hundred Three (833) square meters, more or less, covered by TCT No. 39869, both issued by the Registry of Deeds for Metro Manila District II (Mandaluyong City). Wack Wack Condominium Unit Owners, Inc. (the "Condominium Corporation"), on the other hand, is a non-stock, non-profit corporation duly organized by the unit owners and existing under and by virtue of Philippine laws, with address at 643 Lee St., Addition Hills, Mandaluyong City. Its principal purpose and objective is to own and hold title to and manage the common areas, including the land, where the condominium project is located. ICAcHE GFC is going to turn over, by means of a Deed of Transfer, to the Condominium Corporation the abovementioned two (2) parcels of land together with the common areas and improvements thereon on which the condominium project is situated for the purpose of holding title thereto and managing the aforesaid parcels of land and common areas thereof for the common benefit of the unit owners. The aforementioned Deed of Transfer is made without consideration and in fact, it is not in the nature of a sale to the Condominium Corporation; hence, no taxable income or gain will be generated or will result therefrom. cDAISC In reply, please be informed that in one case, this Office had occasion to rule in BIR Ruling No. DA-411-2005 dated October 4, 2005, as follows: ". . . 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.'" EADCHS In view of the foregoing, this Office is of the opinion that transfer by GFC of its two (2) parcels of land and the common areas of Wack Wack Townhomes Condominium Project in favor of Wack Wack Condominium Unit Owners, Inc. is exempt from the payment of creditable withholding tax prescribed by Section 57 of the Tax Code of 1997, as amended and as implemented by Section 2.57 (B) of Revenue Regulations No. 2-98, as amended and the documentary stamps tax under Section 196 of the same Code. However, the notarial acknowledgment to said deed of transfer is subject to the DST of Php15.00 pursuant to Section 188 also of the Tax Code of 1997, as amended. (BIR Ruling No. 169-2003 dated May 23, 2003) 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 as null and void. TSIaAc Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service