ASB Realty Corporation

October 26, 2007 BIR RULING [DA-572-07] 57 (B), 196; DA-019-2000 ASB Realty Corporation 4/F St. Francis Square Doa Julia Vargas Ave. cor Bank Drive Ortigas Center, Mandaluyong City Attention: Atty. Rolando P. Domingo Senior Vice-President Gentlemen : This refers to your letter dated August 13, 2007 requesting for a confirmation of opinion that the transfer of a parcel of land and common areas of a condominium project from the developer to the condominium corporation without any consideration is exempt from income tax/creditable withholding tax under Sec. 57 (B), in relation to Sec. 27 (D) (5), documentary stamp tax pursuant to Sec. 196 and value-added tax under Sec. 106 all of the 1997 Tax Code, as amended. EaScHT The facts as represented are as follows: ASB Realty Corporation (ASBRC), a corporation duly organized and existing under and by virtue of the laws of the Philippines is a real estate developer engaged in the development of office and residential condominium units. One of its project BSA Mansion Condominium Project was developed on a parcel of land covered by Transfer Certificate of Title (TCT) No. 185749 of the Registry of Deeds for Makati, Metro Manila and located at Legaspi Village, Makati City. On July 17, 1993 ASBRC executed a Master Deed with Declaration of Restrictions of the BSA Mansion Condominium Project. In accordance with the provisions of Republic Act (RA) No. 4726 (Condominium Act), BSA Mansion Condominium Corporation (BSAMCC) was duly organized as a non-profit non-stock corporation with the purpose of holding title to and managing the common areas of the condominium project. A Deed of Conveyance for the transfer of the parcel of land together with all the common areas without any consideration and in pursuance to said RA 4726 will be executed between ASBRC and BSAMCC. In reply, please be informed that since the Deed of Conveyance above-mentioned will be made without monetary consideration and will not be in connection with a sale made to BSAMCC, no taxable income will be generated and a fortiori , no creditable withholding tax is payable and collectible. The purpose of the conveyance to BSAMCC is for the management of the project for the common benefit of the unit-owners. (Section 10, R.A. 4726) ATEHDc 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." In view thereof, this Office is of the opinion as it hereby holds that the aforesaid transaction is not subject to the creditable withholding tax prescribed by Section 2.57 (B) of Revenue Regulations No. 2-98, implementing Section 57 (B), in relation to Section 27 (D) (5) of the Tax Code of 1997. Neither is it subject to the documentary stamp tax imposed under Section 196 of the same Code, as amended. However, the notarial acknowledgement to said deed of conveyance is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the Tax Code of 1997, as amended. (BIR Ruling No. DA-019-2000 dated January 11, 2000) AaIDCS The transfer is also not subject to VAT since under Section 105 of the Tax Code of 1997, any person who, in the course of trade or business, sells, barters, exchanges, leases goods or properties, renders services and any person who imports goods shall be subject to VAT imposed in Sections 106 to 108 of the same Tax Code, as amended. Hence, by conveying the parcel of land and the common areas, ASBRC neither sells, barters, exchanges goods, properties nor renders services to be subject to VAT. 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. cCaEDA Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service