Uy Law Office

April 17, 2009 BIR RULING [DA-(C-054) 193-09] R.A. 4726; 256-07 Uy Law Office Unit 3503, Atlanta Centre, No. 31 Annapolis St. Greenhills, San Juan City Attention: Jonathan Herbert C. Uy Gentlemen : This refers to your letter dated March 20, 2009 requesting on behalf of your client, Triple-A Properties, Inc. (Triple-A),for a confirmation that the transfer of the parcel of land and common areas of the condominium project built thereon by Triple-A in favor of Millenium Suites Condominium Association, Inc. (MSCAI) is exempt from the payment of capital gains tax, income tax/creditable withholding tax, value-added tax and the documentary stamp tax. It is represented that Triple-A is a corporation duly organized and existing under and by virtue of the laws of the Philippines; that Triple-A erected the Millenium Suites, a condominium project which consists of 32-storeys, located at 104 Aguirre Street, Legazpi Village, Makati City; that Triple-A is the registered owner of the land where the condominium is standing on under TCT No. 200115 and the four (4) parking slots where the generator sets have been installed for common use under CTC Nos. 56395, 56396, 56397, and 56398; that the Master Deed with Declaration of Restrictions provides that: "The Declarant (Triple-A) shall initiate the formation and organization of a condominium corporation which shall be a non-profit corporation pursuant to the provisions of the Condominium Act and the Corporation Code, for the purpose of holding title to, managing and maintaining all the common areas in the project, the rights, powers and functions of which shall be exercised by a management company duly designated/appointed by the Declarant."; that MSCAI was incorporated for such purpose; and that the administration and management of the condominium's affairs has already been turned over by Triple-A to MSCAI. In reply, please be informed that since the aforementioned conveyance is without consideration and is not in connection with a sale made to the condominium corporation, no income is generated and a fortiori , no creditable withholding tax is payable and collectible. The purpose of the conveyance to the condominium corporation is for the management of the project for the common benefit of the unit-owners, pursuant to Section 10 of R.A. 4726, otherwise known as the Condominium Act. 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." Further, since the conveyance of common areas to MSCAI is without monetary consideration and is not in connection with a sale, it is likewise not subject to VAT imposed under Section 106 of the Tax Code of 1997, as amended, nor to capital gains tax imposed under Section 27 (D) (5) of the Tax Code of 1997, as amended. 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 of the Tax Code of 1997, as amended. Neither is it subject to the documentary stamp tax imposed under Section 196 of the same Code. 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. THaDEA 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, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service