BIR Ruling [DA-587-98]

December 29, 1998 BIR RULING [DA-587-98] SyCip Gorres Velayo & Co 6760 Ayala Avenue Makati City Attention: Emmanuel C . Alcantara Tax Division Gentlemen : This refers to your letter dated June 15, 1998 requesting on behalf of your client, ASB Realty Corporation (ASB) , for a confirmation of your opinion that the transfer of real properties by ASB in the course of its trade or business is not subject to the imposition of the Withholding Tax and Documentary Stamp Tax (DST). LLjur It is represented that ASB with business address at the ASB Building, 114 Benavidez Street, Legaspi Village, City of Makati, is a real estate developer engaged in the development of office and residential condominium units; that its development projects for the taxable year 1998 are as follows: 1. A parcel of land (Lot 2, Block 22 of the cons.-subd. (Plan [LRC] Pcs-6254, [Sheet 3] being a portion of the cons. Of Lots 1-39, Blk. 1, Lots 1-18, Blk. 2, Lots 1-40, Blk. 3, Lots 1-10, Blk. 4, Lots 1-31, Blk. 5, Lots 3-28, Blk. 6, Lots 1-37, Blk. 14, Blk. 15, & 16, & St. Lots 1-16, all described on plan [LRC] Psd-4820, Lots 3-18, Blk. 7, Lots 4-7, Blk. 8, Lots 3-21, Blk. 9, Lots 3-19, Blk. 10, Lots 3-17, Blk. 11, Lots 9 & 10, Blk. 12, & Lots 1-7, and 17-23, Blk. 13, all described on plan [LRC] Psd-6158, Lots 1-New and 2-New, Blk. 6, Lots 1-New & 2-New, Blk. 7, Lots 1-New to 3-New, Blk. 8, Lots 1-New & 2-New, Blk. 9, Lots 1-New & 2-New, Blk. 10, Lots 1-New and 2-New, Blk. 11, Lots 1-New to 8-New, Blk. 12, Lots 8-New to 16-New, Blk. 13 & St. Lots 1-8, all described on plan [LRC] Pcs-4162, LRC [GLRO] Rec. No. 2029), situated in the Municipality of Makati, Province of Rizal, Island of Luzon. Said parcel of land, which we will designate as Lot "A" for brevity, contains an area of Nine Hundred and Nineteen (919) square meters, and is covered by Torrens Certificate of Title (TCT) No . 185710 ; A parcel of land (Lot 6 Block 13 of the cons.-subd. Plan [LRC] Pcs.-6254, [Sheet 2] being a portion of the cons. of Lots 1-39, Blk. 1, Lots 1-18, Blk. 2, Lots 1-40, Blk. 3, Lots 1-10, Blk. 4, Lots 1-31, Blk. 5, Lots 3-28, Blk. 6, Lots 1-37, Blk. 15 & 16, & St. Lots 1-16, all described on plan [LRC] Psd-4820, Lots 3-18, Blk. 7, Lots 4-7, Blk. 8, Lots 3-21, Blk. 9, Lots 3-19, Blk. 10, Lots 3-17, Blk. 11, Lots 9 & 10, Blk. 12, & Lots 1-7, and 17-23, Blk. 13, all described on plan [LRC] Psd-6158, Lots 1-New and 2-New, Blk. 6, Lots 1-New & 2-New, Blk. 7, Lots 1-New to 3-New, Blk. 8, Lots 1-New & 2-New, Blk. 10, Lots 1-New and 2-New, Blk. 11, Lots 1-New & 8-New, Blk. 12, Lots 8-New to 16-New, Blk. 13 & St. Lots 1-8, all described on plan [LRC] Pcs-4162, LRC [GLRO] Rec. No. 2029), situated in the Municipality of Makati, Province of Rizal, Island of Luzon. Said parcel of land, which we will designate as Lot "B" for brevity, contains an area of Eight Hundred and Thirty Three (833) square meters, and is covered by Torrens Certificate of Title (TCT) No . 185749 ; and 2. A parcel of land (Lot 4, Block 25 of the cons.-subd. Plan [LRC] Pcs-6254, [Sheet 3] being a portion of the cons. Of Lots 1-39, Blk. 4, Lots 1-18, Blk. 2, Lots 1-40, Blk. 3, Lots 1-10, Blk. 4, Lots 1-31, Blk. 5, Lots 3-28, Blk. 6, Lots 1-37, Blk. 14, Blk. 15 & 16, & St. Lots 1-16, all described on plan [LRC] Psd-4820, Lots 3-18, Blk. 7, Lots 4-7, Blk. 8, Lots 3-21, Blk. 9, Lots 3-19, Blk. 10, Lots 3-17, Blk. 11, Lots 9 & 10, Blk. 12, & Lots 1-7, and 17-23, Blk. 13, all described on plan [LRC] Psd-6158, Lots 1-New and 20-New, Blk. 6, Lots 1-New & 2 New, Blk. 7, Lots 1-New & 3-New, Blk. 8, Lots 1-New & 2-New, Blk. 9, Lots 1-New & 2-New, Blk. 10, Lots 1-New and 2-New, Blk. 11, Lots 1-New & 8-New, Blk. 12, Lots 8-New to 16-New, Blk. 13 & St. Lots 1-8, all described on plan [LRC] Pcs-4162, LRC [GLRO] Rec. No. 2029), situated in the Municipality of Makati, Province of Rizal, Island of Luzon. Said parcel of land, which we will designate as Lot "C" for brevity, contains an area of Nine Hundred and Thirty One (931) square meters, and is covered by Torrens Certificate of Title (TCT) No . 196030 ; that on July 17, 1993, ASB executed a Master Deed with Declaration of Restrictions of BSA Mansion Condominium Corporation for Lot "B" which document was duly notarized; that Lot "B" and the building being constructed thereon by ASB was constituted into a condominium project in accordance with Republic Act (RA) No. 4726; that in accordance with the provisions of RA No. 4726, BSA Mansion Condominium Corporation was duly organized as a non-profit, non-stock corporation with the purpose to hold title to and manage the common areas of the Condominium Project; that on August 3, 1994, ASB executed a Master Deed with Declaration of Restrictions of Asian Mansion II Condominium Corporation for Lot "C" which document was duly notarized; that Lot "C" and the building being constructed thereon by ASB was constituted into a condominium project in accordance with RA No. 4726; that in accordance with the provisions of RA No. 4726, Asian Mansion II Condominium was duly organized as a non-profit, non-stock corporation with the purpose to hold title to and manage the common areas of the Condominium Project; that on November 16, 1994, ASB executed a Master Deed with Declaration of Restrictions of BSA Suites Condominium Corporation for Lot "A" which document was duly notarized; that Lot "A" and the building being constructed thereon by ASB was constituted into a condominium project in accordance with RA No. 4726; that in accordance with the provisions of RA No. 4726, BSA Suites Condominium Corporation was duly organized as a non-profit, non-stock corporation with the purpose to hold title to and manage the common areas of the Condominium Project; that ASB, having completed the construction of the Condominium Projects for Lots "A", "B", and "C", is now set to turn over the said condominium projects as follows: 1. Lot "A", TCT No. 185710, to be turned over to BSA Suites Condominium Corporation; 2. Lot "B", TCT No. 185749, to be turned over to BSA Mansion Condominium Corporation; and 3. Lot "C", TCT No. 186030, to be turned over to Asian Mansion II Condominium Corporation; and that ASB will effect the transfer or conveyance of the above lots to the condominium corporations without any consideration. In reply, please be informed as follows: Since the above-mentioned transfer of the subject real properties from ASB to BSA Suites Condominium Corporation, BSA Mansion Condominium Corporation and Asian Mansion II Condominium Corporation, respectively, is without consideration and is not in connection with a sale made to BSA Suites Condominium Corporation, BSA Mansion Condominium Corporation and Asian Mansion II Condominium Corporation, no income was generated by ASB, and a fortiori, no creditable withholding tax is payable and collectible. Thus, the aforesaid Deed of Conveyance is not subject to any creditable withholding tax under Sec. 57(B), in relation to Sec. 27(D)(5) of the Tax Code of 1997. 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." Thus, it is not subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. However, the acknowledgment to the said deed of conveyance is subject to the documentary stamp tax of P15.00 on certification pursuant to Sec. 188 of the Tax Code of 1997. (BIR Ruling No. DA 164-98 dated April 22, 1998 and BIR Ruling No. 75-97 dated July 10, 1997) cdtech 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, and/or any of the requirements set forth in this letter are not complied with, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)