BIR Ruling [DA-600-04]

November 25, 2004 BIR RULING [DA-600-04] R.A. 4726; DA-419-96 Bright Builders, Inc. Centro Plaza Building No. 49 Scout Madrian cor. Scout Torillo Streets So. Triangle, Quezon City Attention: Jesse T. Bustamante President Gentlemen : This refers to your letter dated November 18, 2004 stating that Bright Builders, Inc. is a corporation duly organized and existing under the laws of the Philippines; that it is the owner in fee simple of two (2) parcels of land located at Panay Avenue, Quezon City covered by TCT Nos. N-141642 and N-141643 issued by the Registry of Deeds for Quezon City under Tax Declaration No. D-110-00748 and D-110-00747, respectively and containing an aggregate area of 666.66 square meters; that Bright Builders, Inc. has entered into a Joint Venture Agreement (JVA) with New San Jose Builders, Inc. for the erection of a condominium building (Project); that the Project is established in accordance with R.A. No. 4726; that on the other hand, NSJB Bright Condominium Corporation is a corporation duly organized and existing under the laws of the Philippine; that it is established to own the Property and the common areas and to manage the Project; that the Project consists of condominiums, each of which has two components, namely, an exclusive and divided interest in a physically defined constructed and improved air space as evidenced by a Condominium Certificate of Title and an undivided interest, in common, directly attributable to the land on which the Building is located and to other common areas of the building as evidenced by a membership share in the condominium corporation; and that in compliance with R.A. 4726 Bright Properties, Inc. hereby transfer, convey and assign unto NSJB Bright Condominium Corporation all the rights, title and interests of Bright Builders, Inc. in and to the property above-described. Based on the foregoing representations, you now request exemption from the payment of creditable withholding tax prescribed under Revenue Regulations No. 2-98, as amended, and documentary stamp tax imposed under Section 196 of the Tax Code of 1997. In reply, please be informed that since the transfer of the land and the common area is without consideration and is not in connection with a sale made to the NSJB Bright Condominium Corporation, no income was generated and a fortiori, no creditable withholding tax is payable and collectible. In fact, the transfer by Bright Builders, Inc. of the property and the common area were made in favor of the individual unit owners of the project, and the purpose of the assignment to the NSJB Bright Condominium Corporation of its common 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 conveyances, 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 property and the common area and facilities to NSJB Bright 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. DAEIHT In view thereof, this Office is of the opinion as it hereby holds that the aforesaid transfer of the property and the common area 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 only 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