BIR Ruling [DA-572-04]

November 11, 2004 BIR RULING [DA-572-04] Uniphil Marketing Corporation No. 500 San Juan Street Binondo, Manila Attention: Mr. Alexander Tang President Gentlemen : This refers to your letter dated August 2, 2004 requesting for a ruling that the conveyance by Uniphil Marketing Corporation, developer/assignor, of the common areas and twenty one (21) parking areas of the Regina Garden II Condominium to the Regina Garden II Condominium Corporation, is exempt from the capital gains tax/creditable withholding tax and documentary stamp tax. It is represented that Uniphil Marketing Corporation, a domestic corporation with address at No. 500 Juan Luna, Binondo, Manila, is engaged in the realty business; that it is the registered owner of a parcel of land located at 703 Reina Regente Street, Binondo, Manila, covered by TCT No. 176424 issued by the Registry of Deeds for Manila, with a land area of 1,026.90 square meters; that Uniphil Marketing Corporation has built a condominium building known as Regina Garden II Condominium; that on the other hand, the Regina Garden II Condominium Corporation is a non-stock, non-profit corporation formed for the purpose or holding the title, managing and maintaining the common and parking areas of the aforesaid project and more particularly described as follows: Particulars Area (sq.m.) TCT No. Tax Declaration Property Index No. No. Basement Floor: BF #01 10.00 14083 C-027-96-288-00094 117-08-288-02-017-B1 BF #02 10.00 14084 C-027-96-288-00095 117-08-288-02-017-B2 BF #04 10.00 14086 C-027-96-288-60322 117-018-288-02-017-B229 BF #05 10.00 14087 C-027-96-288-00098 117-08-288-02-017-B5 BF #06 10.00 14088 C-027-96-288-00099 117-08-288-02-017-B6 BF #07 10.00 14089 C-027-96-288-00100 117-08-288-02-017-B7 BF #08 10.00 14090 C-027-96-288-00101 117-08-288-02-017-B8 BF #09 10.00 14091 C-027-96-288-00102 117-08-288-02-017-B9 BF #10 10.00 14092 C-027-96-288-00103 117-08-288-02-017-B10 BF #11 10.00 14093 C-027-96-288-00104 117-08-288-02-017-B11 BF #12 10.00 14094 C-027-96-288-00105 117-08-288-02-017-B12 BF #13 10.00 14095 C-027-96-288-00106 117-08-288-02-017-B13 BF #14 10.00 14096 C-027-96-288-00107 117-08-288-02-017-B14 BF #15 10.00 14097 C-027-96-288-00108 117-08-288-02-017-B15 BF #16 10.00 14098 C-027-96-288-00109 117-08-288-02-017-B16 BF #17 10.00 14099 C-027-96-288-00110 117-08-288-02-017-B17 BF #18 10.00 14100 C-027-96-288-00111 117-08-288-02-017-B18 BF #19 10.00 14101 C-027-96-288-00112 117-08-288-02-017-B19 BF #20 10.00 14102 C-027-96-288-00113 117-08-288-02-017-B20 BF #21 10.00 14103 C-027-96-288-00114 117-08-288-02-017-B21 BF #22 10.00 14104 C-027-96-288-00115 117-08-288-02-017-B22 and that on July 19, 2004, a Deed of Reconveyance was executed by and between Uniphil Marketing Corporation and Regina Garden II Condominium Corporation whereby the former transferred and conveyed unto the latter the title to the above parcel of land together with the common and parking areas in compliance with R.A. No. 4726. DaTISc In reply, please be informed that since the transfer is without monetary consideration and is not in connection with a sale made to the Homeowners Association, no income was generated and a fortiori , no creditable withholding tax is payable and collectible. In fact, the sales by Uniphil Marketing Corporation of the condominium units were made in favor of the individual unit owners of the condominium project, and the purpose of the transfer to the Regina Garden II Condominium Corporation of its common and parking areas and facilities is for its management, and for the common benefit and enjoyment of the members-unit owners. ( Section 10, R.A. No. 4726 ) Moreover, Section 196 of the Tax Code of 1997 provides that on all conveyance, deeds, instruments, or writings, other than grants, patents or original certificates of adjudication issued by the Government, whereby any land, tenement or other realty sold shall be granted, assigned, transferred or otherwise conveyed to the purchaser, or purchasers, or to any other person or persons designated by such purchaser or purchasers, there shall be collected a documentary stamp tax, at the rates . . . prescribed, based on the consideration contracted to be paid for such realty or on its fair market value determined in accordance with Section 6(E) of the said Code, whichever is higher: . . . Inasmuch as the transfer of the common and parking areas and facilities to the Regina Garden II Condominium Corporation is not in connection with a sale, the same is not subject to documentary stamp tax prescribed in Section 196 of the said Code, supra . In view thereof, this Office holds that the aforesaid transfer 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 of the Tax Code of 1997. Neither is it subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. However, the notarial acknowledgment to said deed of conveyance is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the said Code. ( BIR Ruling No. 550-93 dated December 29, 1993, DA419-96 dated November 12, 1996 ) 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, (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service