Valerio & Maderazo Law Offices

May 27, 2009 BIR RULING [DA-(C-073) 255-09] R.A. 4726; 256-07 Valerio & Maderazo Law Offices B1 Luisa Bldg. 2, 107 Maginhawa St. Quezon City Attention: Noel R. Valerio Gentlemen : This refers to your letter dated November 18, 2008 requesting on behalf of your client, Sterten Place Condominium Corporation (SPCC), for a confirmation that the transfer of the parcel of land and common areas of the condominium project built thereon by FFI Development Inc. (FFI) in favor of Sterten Place Condominium Corporation is exempt from the payment of income tax/creditable withholding tax and the documentary stamp tax. AEcIaH It is represented that FFI is a corporation duly organized and existing under and by virtue of the laws of the Philippines; that in 1999, FFI erected the Sterten Place Condominium Building located at 116 Maginhawa St., Quezon City; that FFI is the registered owner of the said condominium under TCT No. 166126; that FFI has sold out the condominium units except for five (5) units; that the Master Deed with Declaration of Restrictions provides that: "a corporation to be known as 'Sterten Place Condominium Corporation' shall be formed and organized pursuant to the Condominium Act and the Corporation Code as a non-profit, non-stock corporation to hold title to all the Common Areas, to manage the Condominium and to do such things as may be necessary, incidental and convenient to the accomplishment of said purposes;" and that the administration and management of the condominium's affairs has already been turned over by FFI to SPCC. 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 SPCC 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. LLpr 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