Jalecor Incorporated

June 5, 2009 BIR RULING [DA-(C-086) 281-09] DA044-02 Jalecor Incorporated 4th Floor, Liberty Building 835 Arnaiz Avenue Legaspi Village, Makati City Attention: Mr. Jesus S. Jalandoni, Jr. President Gentlemen : This refers to your letter dated February 5, 2009 stating that Jalecor, Inc. is a corporation organized and existing under the laws of the Philippines; that on the other hand, Jalandoni Compound Homeowners' Association, Inc. is a non-stock, non-profit corporation organized and existing under the laws of the Philippines with principal office address at Jalandoni Compound, Don Benito Hernandez Street, Pasay City; that Jalecor, Inc. is the absolute and registered owner of a parcel of land consisting of a road right of way located at Pasay City containing an area of 2,009 square meters and covered by TCT No. 84363; that the Jalandoni Compound Homeowners' Association, Inc. is established to own the property and the common areas and to manage the property; and that in compliance with Republic Act (R.A.) No. 4726, Jalecor, Inc. transfers, conveys and assigns unto the Association all the rights, title and interests of Jalecor, Inc. in and to the property above-described. EDHCSI 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 thereto, please be informed that since the transfer of the land and the road right of way is without consideration and is not in connection with a sale made to the Association, no income was generated and a fortiori, no creditable withholding tax is payable and collectible. In fact, the transfer by Jalecor, Inc. of the property and the road right of way made in favor of the Association is for its management, and for the common benefit and enjoyment of the members-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), infra, whichever is higher: . . . . Inasmuch as the transfer of the property and the common area and facilities to the Association is not in connection with a sale, the same is not subject to documentary stamp tax prescribed in Section 196, supra. IN VIEW OF THE FOREGOING, this Office holds that the aforesaid transfer of the property and the road right of way is not subject to the creditable withholding tax prescribed in 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, infra. However, the notarial acknowledgment to said deed of conveyance is subject to the documentary stamp tax of P15.00 only pursuant to Section 188, supra . 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. cECTaD Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service