Uy Clerigo & De Guzman Law Offices

October 28, 2009 BIR RULING [DA-(C-246) 628-09] 57 (B), 196; DA-235-96 Uy Clerigo & De Guzman Law Offices Unit 1208 Cityland Condominium 10 Tower II H.V. dela Costa cor. Valero Sts., Salcedo Village, Makati City Attention: Atty. Stevenson Y. Uy Gentlemen : This refers to your letter dated September 24, 2009 requesting on behalf of your client, Perla Condominium Corporation (PCC) for confirmation of opinion that the transfer of a common area from St. Francis Square Realty Corporation (St. Francis for brevity) to PCC is exempt from income tax and documentary stamp tax (DST) under the 1997 Tax Code, as amended. EAHcCT It is represented that St. Francis, formerly known as ASB Realty Corporation is the owner and developer of a condominium project known as Perla Compania de Seguros Mansion (hereinafter referred to as "Perla Mansion") located at No. 117 Carlo Palanca, Jr. St., Legaspi Village, Makati City. Sometime in January 16, 1991, PCC was organized as a non-stock, non-profit condominium corporation pursuant to the provisions of Republic Act (RA) No. 4726, as amended by RA 7899, otherwise known as the Condominium Act, to hold title and manage the common areas of Perla Mansion. The title of the parcel of land over which Perla Mansion stands has already been transferred to PCC which is presently being managed by it as part of its common areas. There is, however, one piece of property which is part of Perla Mansion's common area but the title of which has not yet been transferred to PCC. Said property is referred to as the Upper Penthouse Unit No. 7 ("UP-7") of Perla Mansion and title thereto is still under the name of ASB Realty Corporation, the developer of Perla Mansion. On April 30, 2009, St. Francis executed a Deed of Conveyance conveying UP-7 in favor of PCC. The conveyance of UP-7 to PCC is pursuant to the amendments appearing in the Master Deed and the mandate of the Condominium Act, which requires the developer to transfer all common areas to the condominium corporation for the proper management thereof for the common benefit of the unit owners (Section 10, RA 4726, as amended by RA 7899). The conveyance of UP-7 was executed without any monetary consideration. In reply, please be informed that the transfer of title over UP-7 from St. Francis to PCC is made without monetary consideration, the transfer is made for the purpose of complying with the requirements of the Condominium Act. Accordingly, we submit that the said transfer is not subject to income tax, since no income was generated, and as such, no creditable withholding tax is likewise due. Worthy of mention is BIR Ruling No. DA-235-96 where Paxton Galleria de Binondo, the owner-developer of a piece of land upon which the Galleria de Binondo project was constructed, executed a deed of conveyance transferring title to the same parcel of land in favor of Galleria de Binondo Condominium Association, Inc. without monetary consideration pursuant to the requirements of the Condominium Act. In said ruling, the BIR rules that since the deed of conveyance was without consideration and was not in connection with a sale made to the condominium corporation, no income was generated thereby and a fortiori, no creditable withholding tax was payable and collectible. Furthermore, Sec. 185 of Revenue Regulation No. 26 states that: "Section 185. Conveyance without consideration. Conveyances of realty, not in connection with a sale to trustees or other persons without consideration, is not taxable." aSEDHC The conveyance of UP-7 to PCC was without any monetary consideration and not in connection with a sale. Thus, the transaction is not subject to DST as imposed under Section 196 of the Tax Code of 1997, as amended, save for the DST of P15.00 for the notarial acknowledgement on the deed of conveyance. Other than the said DST, no other taxes are due upon the execution of the deed of conveyance. 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