Cityland Development Corporation

July 24, 2009 BIR RULING [DA-(C-146) 404-09] Sec. 27, 57 (B), 188; DA-(C106)-330-08 Cityland Development Corporation 2/F & 3/F Cityland 10 Tower 1 156 H.V. Dela Costa Street Ayala North, Makati City Attention: Atty. Emma G. Jularbal Corporate Secretary Gentlemen : This refers to your letter dated July 16, 2009 requesting for a ruling on the tax consequences of the assignment of rights over a condominium from the developer to the condominium corporation. Documents submitted disclosed that Cityland Development Corporation ("Cityland") is the developer of a condominium building known as "Makati Executive Tower II" located at Cityland Square, Dela Rosa corner Medina Street, Pio del Pilar, Makati City; that the said condominium building was constructed on a parcel of land covered by Transfer Certificate of Title No. 217503 of the Registry of Deeds for Makati; that Makati Executive Tower II, Inc. ("Condominium Corporation") is a non-stock, non-profit organization which was organized to manage and maintain the common areas in the said condominium building; that in compliance with the law, Cityland provided said condominium with amenities/facilities such as gymnasium, sauna, playground, water facilities and other common areas; that such amenities/facilities are used and enjoyed by the unit owners who are members of the Condominium Corporation; that on July 15, 2009, Cityland executed a Deed of Assignment over the common areas in favor of the Condominium Corporation without monetary consideration, because said common areas, which include the aforementioned parcels of land, form part of the condominium building; that this is provided in the Master Deed with Declaration of Restrictions pertinent to the building; and that the said transfer/assignment was effected to ensure proper maintenance of the condominium facilities/amenities for the common benefit of the members of the Condominium Corporation. In reply, please be informed that since the Deed of Assignment was made without consideration and is not in connection with a sale made to the Condominium Corporation, no taxable income will be 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. (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 (8) of Revenue Regulations No. 2-98, 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 of the same Code. However, the notarial acknowledgement to said 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-178-2003 dated June 5, 2003) 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 null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service