Maco Realty Corporation

May 27, 2009 BIR RULING [DA-(C-072) 254-09] 57 (B), 196; DA-019-2000 Maco Realty Corporation G/F J&J Condominium 867 Gen. Solano St. San Miguel, Manila Attention: Ms. Elvira P. Machuca President Gentlemen : This refers to your letter dated February 25, 2009 requesting in effect for tax exemption on the transfer by Maco Realty Corporation (MRC) of its common areas to Edificio J y J Condominium Owners Association, Inc. (Edificio J y J for brevity). aDcHIS It appears that MRC is a domestic corporation duly registered with the Securities and Exchange Commission (SEC) with Tax Identification No. (TIN) 000-664-683-000. It is the developer of a condominium building located in 867 Gen. Solano cor. Nepomuceno Sts., San Miguel, Manila known as Edificio J y J Condominium. It is likewise the owner of the parcel of land covered by Transfer Certificate of Title (TCT) No. 182649 with an area of 633.30 sq.m. where the said condominium building was constructed. On the other hand, Edificio J y J whose TIN is 222-871-594-000, is a duly organized non-stock non-profit corporation under SEC Reg. No. AN093-004267 dated October 1, 1993. It is created for the purpose of holding title to and managing the common areas of the above-stated condominium project. A Deed of Conveyance for the transfer of ownership of the common areas was executed between MRC and Edificio J y J on February 26, 2009. 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 Edificio J y J, no taxable income will be generated and a fortiori , no creditable withholding tax is payable and collectible. The purpose of the conveyance to Edificio J y J is for the management of the project for the common benefit of the unit-owners. (Section 10, R.A. 4726) 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) 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 common areas, MRC neither sells, barters, exchanges goods, properties nor renders services to be subject to VAT. EIAScH 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. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service