Leonila Realty & Development Corporation

December 12, 2007 BIR RULING [DA-640-07] 27; 57 (B); 196 DA-610-2004; DA-453-2006 Leonila Realty & Development Corporation Bohol Mansions, No. 43, Bohol Avenue, Quezon City Attention: Mr. Fernando C. Campos Gentlemen : This refers to your letter dated November 21, 2007 requesting for confirmation of your opinion that the assignment and transfer of the footprint of the Arcontica Condominium by the developer Leonila Realty & Development Corporation ("LRDC") covered by Transfer Certificate of Title No. N-271869, in favor of the condominium corporation known as New Arcontica Condominium Corporation ("NACC") is exempt from the payment of creditable withholding tax and documentary stamp tax. cSCTID It is represented that due to a protracted litigation in court, the developer corporation, LRDC was not able to transfer the lot (footprint of the Arcontica Condominium) with an area of 702 square meters and covered by TCT No. N-271869 to the old corporation now under dissolution; that to avoid delay, the unit/homeowners have agreed to transfer the title of the lot to the New Arcontica Condominium Corporation which is in the process of incorporation; and that a Deed of Assignment between LRDC and NACC was executed on November 21, 2007 to effect the transfer of the lot from LRDC as the developer of the Arcontica Condominium to NACC as the condominium corporation. In reply, please be informed as follows: 1. Since the assignment, transfer and conveyance of the aforementioned common area (lot/footprint) of the condominium was made without any monetary consideration and not in connection with a sale made to New Arcontica Condominium Corporation, no income was generated and a fortiori , no creditable withholding tax is payable and collectible. ACTIHa In view thereof, this Office is of the opinion as it hereby holds that the aforesaid Deed of Assignment transferring the subject lot in favor of the New Arcontica Condominium Corporation is not subject to the creditable withholding tax prescribed under Revenue Regulations No. 2-98, as amended, implementing Section 57 (B) in relation to Section 27 (A) and (D) (5), all of the Tax Code of 1997. ( BIR Ruling No. DA-453-2006 dated July 25, 2006 ) 2. 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, the said assignment and transfer is neither subject to the documentary stamp tax nor value-added tax imposed under Section 196 and 105, both of the Tax Code of 1997. However, the notarial acknowledgement on the Deed of Assignment is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the Tax Code of 1997. ( BIR Ruling No. DA-184-2001 dated October 10, 2001 ) 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. EaHcDS Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service